Climate War? EU Could Use Carbon Border Tax Against Brexit Britain, Warns MEP

The EU could deploy a carbon border tax against the UK after Brexit, according to the head of the European Parliament’s environment committee, if Westminster diverges from bloc rules on issues like carbon markets.

French MEP Pascal Canfin told reporters on Monday (27 January) that the EU “should be tough” and “shouldn’t be afraid of an economic no-deal in December”, as the next round of Brexit-based negotiations loom on the horizon.

The talks will determine what sort of relationship the UK and EU will have after the transition period ends on 31 December and Canfin made clear that divergence from bloc rules will make trade relations more difficult.

“Talks haven’t started on the right path, with the UK government saying it wants full [single market] access but also divergence. To me that is like the EU asking for full alignment but with quotas,” the lawmaker warned.

Brussels’ two top officials, the presidents of the European Commission and the European Council, signed off on Britain’s EU divorce agreement Friday (24 January).

As head of the Parliament’s environment committee (ENVI), Canfin will help advise negotiators on related issues during the talks, citing carbon markets as a tangible example of where difficulties might arise.

The UK is currently a part of the EU’s emissions trading scheme (ETS) but the government plans to leave the carbon market and set up its own carbon-pricing equivalent. Canfin told reporters that “the markets have to have the same price”.

“For the EU’s industry, you can’t accept that the UK has full access” to the EU’s single market while a lower carbon price is on offer across the Channel, he insisted.

UK government documents from 2018 suggest that a British equivalent would add up to around €35 per tonne, while the EU ETS currently trades at roughly €25, although the price is expected to increase as new green policies are signed and delivered.

“We started designing the carbon border adjustment mechanism. We might imagine that we will apply this mechanism to the UK in order to restore the level playing field,” Canfin suggested, referring to a new tool aimed at preventing ‘climate dumping’.

The Renew Europe MEP also cited carbon markets when asked if the UK would only be expected to accept EU laws as they stand on the day a new trade deal is signed or if it would have to comply with updates and reviews, known as ‘dynamic alignment’.

Canfin replied that “for the EU team, it’s about no-regression clauses, so you can’t diverge regarding current EU law”, adding that updates to climate rules like the ETS will soon be on the cards with the new Green Deal agenda presented by the European Commission last month.