The EU’s Green New Deal: protecting the Planet or the European industry?

Will the EU be able to reach its 2050’s environmental targets? If so, at what costs for the international trade market?

As President of the EU Commission, Ms. Ursula von der Leyen, is preparing to unveiling EU’s Green New Deal later this Wednesday (11 December), debates about the impacts of the deal are raising. Leaders of developing countries argue that EU’s pro-environment measures are favouring EU protectionism and threatening their economies.

In 2018, EU banned the use of palm-oil in biofuels by excluding it from renewable energy targets. The ban resulted after Environmentalist lobbyers had pointed at the role palm oil cultivation plays in encouraging deforestation. But, Mr Hosuk Lee-Makiyama, fellow at the European Centre for International Political Economy think-tank, says that it was a decision in favour of European oilseed growers, rather than scientific driven. Consequently, Malaysia’s prime minister Mahathir Mohamad and Indonesia’s president Joko Widodo attacked the EU decision describing it as colonialism. Their countries are the biggest palm-oil industry players. The industry makes up 10% of Indonesian exports and 4% Malaysia’s. 

On the same line, Brazil’s president Jail Bolsonaro is sceptical about Europe’s environmental concerns. He thinks that EU’s green measures are business oriented, specifically in regarding the Amazon case. He suspects Mr. Emmanuel Macron and Mr Leo Eric Varadkar’s advocating for the Amazon as a manoeuvre to defend their cattle farmers, who will face tougher competition after the Mercosur, the South American trade bloc, admits 99,000 tonnes a year of South American beef into EU at low tariff. 

As long as policies target products sold in the EU internal market, such as standardising low-energy eco-design for electrical machines, the job is relatively simple. However, the job gets trickier when it becomes an international issue. For instance, the price of EU’s Emissions Trading Scheme (ETS) to shipping and aviation will have to be raised to meet Paris agreement’s goals. But as it does, so will complaints from business (especially SMEs) undercut by imports from next-to-zero tax emission countries.

Ms Ursula von der Leyen’s environmental plan set a net zero challenge to be met by 2050. However, given the current European carbon-emission records, this goal is unlikely to be met. The solution would be to put in force a Carbon Border Tax (CBT). However, applying a comprehensive CBT is almost unworkable, though theoretically effective. In fact, the EU would have to work out not only the total carbon footprint of imported goods, but the entire international supply chain’s emissions. European industry is divided between those who welcome the CBT, like the steel sector whose needs are almost fully covered (74%) within EU borders, and those against the CBT like the automotive industry.

Amid a plethora of opinions and claims, one thing remains certain. Climate change is a global challenge. It affects the planet as a whole. Therefore, neither embargos nor higher taxes, alone, can help address the problem. What leaders around the world have to find is a global framework to tackle, together, this massive challenge.

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