Europe’s Green Deal in trouble as Biden administration warns EU against carbon border tax 

Posted: March 13, 2021 by oldbrew in climate, Politics, Subsidies

European Union map [image credit: Wikipedia]

Call it the Grim New Deal. Everyone must dance to the EU’s climate-obsessive tune – they wish – or pay trade penalties. But opposition is already mounting.
– – –
Europe’s Green Deal and its planned carbon border tax are in serious trouble as the Biden administration raises concerns about its potentially disastrous fallout on international trade and relations, says The GWPF.

According to the European Commission the EU’s Green Deal and its 2050 Net Zero target are threatening the very survival of Europe’s industries unless a carbon border tax is enforced upon countries that are not adopting the same expensive Net Zero policies.

It’s a matter of survival of our industry. So if others will not move in the same direction, we will have to protect the European Union against distortion of competition and against the risk of carbon leakage,” European Commission executive vice-president Frans Timmermans warned in January.

On Wednesday, the European Parliament endorsed the creation of a carbon border tax that is planned to protect EU companies against cheaper imports from countries with weaker climate policies.

However, it would appear that the Biden administration is getting cold feet about the protectionist agenda and its potentially devastating impact of world trade, throwing a spanner in the EU’s plans.

John Kerry, Joe Biden’s climate envoy, has warned the EU that a carbon border tax should be a “last resort,” telling the Financial Times that he was “concerned” about Brussels’ forthcoming plans.

Continued here.

  1. ivan says:

    At the rate the EU is pushing the green new deal I don’t think the remainder of the world has much to worry about for the simple reason all industry will have moved out to where they can continue to work with an adequate power supply or the EU political system of unelected overseers will have imploded and vanished.

    Either way I pity those of us still living here.

  2. Graeme No.3 says:

    The alternative for Europe is to abandon the lunacy of Global Warming. Won’t happen but some countries in the EU may decide to follow Russia’s policy of declaring natural gas as ‘carbon free’.

  3. Phoenix44 says:

    If the rest of the world isn’t following the EU’s insane policies what’s the point of the CEO following them? The world will still warm but everyone in the EU will be much poorer.

  4. oldbrew says:

    The US has a history of penalising what it sees as unfair trading by imposing selective import taxes on the perpetrators, usually on some of their most successful exports.

    Carbon border taxes will test WTO’s inadequate provisions
    DECEMBER 21, 2020

    Russia warns EU against carbon border tax plan, citing WTO rules

    The WTO has got a headache coming here. The EU wants to force its trading competitors down to the same level it is going to fall to with its own net zero nonsense.

  5. Gamecock says:

    Biden and the Europhile Kerry taking a correct position is beyond my comprehension.

    They’ll cave.

  6. tallbloke says:

    Follow the money.

    EU’s carbon regime is spinning out of control
    If the carbon price spirals above €100 this year, it may be viewed as a debacle akin to the vaccine policy.

    European carbon prices have exploded to €43 (£37) a ton, doubling in four months and fast reaching levels that profoundly disrupt the EU’s energy architecture.

    The surge is driving coal out of the EU market as intended. But it is also starting to threaten the commercial viability of natural gas projects, until now seen as big beneficiaries of the net-zero transition.

    Futures contracts under the Emissions Trading Scheme (ETS) have risen eightfold since 2017 as the Commission reforms the broken system.

    The moves have turned parabolic this year after a one-off “rebasing” to soak up the glut of permits, enriching hedge funds and speculators who spotted the implications immediately.

    The carbon price is already within a whisker of the €44 “mid-ambition” level assumed for 2030 in the Commission’s climate impact report last year. It could go much higher yet, causing heartburn for industries that failed to prepare. Some may have to chase a rising market to cover their emissions.

    “We expect €110 by the fourth quarter because they are issuing only 600m permits this year,” said Lawson Steele from Berenberg.

    “There is a mechanical reduction and it is going to lead to a deficit of 800m permits over the next three years. Investors can see that and are building up positions,” he said. Energy hedge fund guru Pierre Andurand has joined the carbon rush.

    Assuming that global economic recovery takes hold, Mr Steele says the carbon price will keep rising until screams of protest force a political reaction. “What I am hearing from the corridors of the EU is that they are happy to see the price rise to €70 to €100 to force a change,” he said.

    Armin Laschet, front-runner to succeed Angela Merkel
    Armin Laschet, front-runner to succeed Angela Merkel
    Phil MacDonald, from consultant Ember, said the Commission’s carbon regime has come off the rails.

    “EU climate policy is as volatile as a GameStop share. Its climate targets mean that carbon prices are a one-way bet, but speculators are entering the market and futures are moving like a rollercoaster, detached from fundamentals,” he said. “It is difficult for businesses to know where the carbon price will end up and at what point it’s economic to make low-carbon investments.”

    Ultimately there is a mechanism for intervention when the market goes wild. The regulator can inject an extra 100m permits, rather like a central bank adding liquidity in a crisis. However, this requires specific thresholds and a unanimous vote by the EU council. It would cut against Ursula von der Leyen’s green deal. She would be accused of capitulating to “brown” vested interests if she yielded too soon.

    Prices can rise only so far before the process short-circuits. In the end that rise forces changes in behaviour and technology. That in turn reduces demand for the permits. ICIS thinks the price will settle at about €80 by 2030, while Refinitiv eyes €90. But it will be a bumpy ride.

    Germany is already introducing its own (broader) carbon tax. This will ratchet up to €65 by the mid-2020s, which indicates the political tolerance level of the European industrial heartland. Power plants already have to pay the full carbon ETS price but heavy industries and emitters have been largely shielded by free allocations. Not any longer.

    Mr Steele said the share of CO2 they must cover rose on average from 10pc last year to 28pc this year. “The price has not been high enough to get industry to do anything. Now for the first time they will have to start paying,” he said.

    Ember’s Mr MacDonald said corporations are mostly prepared for the shock and have bought hedges: “A lot of smaller companies are going to be in difficulty.”

    The power sector has nowhere to hide. “Coal is dead. Once you get to €45, even the cheapest lignite is losing money. Countries still reliant on coal like Poland have seen eye-wateringly expensive electricity prices – and the public won’t stand for them for long,” he said. “Germany’s 2038 coal phase-out pledge is laughable – the subsidies required to keep coal on the system until then would never fly.”

    ‘The latest price jump is nearing levels that eat into the long-term business case for natural gas as well’
    The new Datteln-4 coal plant opened last year in North Rhine-Westphalia is effectively a stranded asset already. It was backed by state premier Armin Laschet, front-runner to succeed chancellor Angela Merkel. The bell is also tolling for three Dutch plants opened over the last decade in a fit of government madness. ICIS Analytics estimates that German coal utilities are 60pc hedged against rising carbon prices for this year and 20pc next year.

    The latest price jump is nearing levels that eat into the long-term business case for natural gas as well, whether pipeline imports from Russia (and Norway) or imports of liquefied natural gas. Both are more expensive than shale gas in the US domestic market. The Nord Stream 2 pipeline from Russia to Germany is becoming a white elephant before it even opens.

    The UK’s Climate Change Committee recommends phasing out gas by 2035. It is a tougher challenge for Europe since the region mostly lacks the UK’s offshore wind bonanza. Germany is also shutting nuclear plants.

    The shift from coal to gas over the last two years has been easy. Utilities can convert quickly. The next phase will be slower since there is no immediate substitute.

    Gas will of course retain a large role in power plants with carbon capture (CCS) and for the production of “blue” hydrogen.

    But gas with CCS will have to compete with the plummeting cost of wind and solar, and one day with “green” hydrogen made from renewables, some of it possibly coming from vast desert wind and solar farms in uninhabited places producing green ammonia.

    Brussels has a tricky balancing act. It is relying on a higher carbon price to do most of the heavy lifting as the EU aims for a 55pc cut in CO2 emissions below 1990 levels by the end of this decade. While the EU’s green deal is rich in aspirational targets, it is mostly declaratory.

    Yet if the carbon price spirals above €100 this year, it may be viewed by many – including powerful voices – as an administrative debacle akin to the vaccine policy.

    The UK is for now sitting on the sidelines. It has left the ETS system and will unveil its own arrangements over the coming months. However, the UK has been living with a higher carbon price than the EU for years (an extra £18 floor) and has partially adapted.

    Boris Johnson is eyeing a CO2 reduction of 65pc and will want to stay a step ahead of the EU as he prepares to host this year’s COP-26 climate summit. It is a safe assumption that the UK will shadow the ETS benchmark with a premium. Besides, carbon fees raise a big fat levy for the Exchequer.

  7. oldbrew says:

    Besides, carbon fees raise a big fat levy for the Exchequer.

    Yes, but high prices and power cuts due to lack of fuel-powered electricity generation can lead to a big fat boot out of office for guilty governments.

  8. Paul Vaughan says:

    OB: You have inverted totalitarianism, so it won’t matter what party gets elected. Joe Trump = Don Biden = same thing, as was recently made crystal clear. The truth isn’t told upfront, but in the meantime we can underscore that we support peace and unity.

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