All eyes are on targets set by the United States and China, which currently produces the largest share of greenhouse gases, and, more important, how they will get there.
Exactly which products the tax would target is still unclear. The United States, for instance, is particularly concerned about the potential effect on American-produced steel, and it remains to be seen whether the border tax proposal would take into account the carbon emissions intensity of imported steel.
The United States is in a tricky position with respect to a prospective European border tax. The Biden administration is keen to restore trans-Atlantic alliances, including on climate change. And yet, with no prospect of carbon pricing legislation in the United States, several U.S. companies could be vulnerable.
The Biden administration has dangled the prospect of a carbon border tax of its own, though its prospects would likely be dim in a divided Congress. “It’s not off the table, certainly, in any of the discussions,” the White House climate adviser, Gina McCarthy, said Tuesday at a conference organized by Bloomberg. “There are many ways in which you could look at a carbon border adjustment as an opportunity here.”
Other aspects of the legislative package are likely to be contentious within the European 27-country bloc itself. Efforts to phase out the sales of new internal combustion engine cars for instance are likely to face objections from some European carmakers. (Bloomberg reported this week that France opposed a proposed 2035 ban on new gas-burning car sales.) Efforts to phase out coal from electricity generation are likely to face opposition from countries with large coal operations, like Poland and Hungary.
The timing of the European draft legislation is key, designed to highlight Europe’s position on advancing climate policies and put pressure on other major emitters, including China and the United States.
“This will be the first attempt to say that it’s not only numbers we commit to, but we have a set of policies, very precise policies,” Laurence Tubiana, the head of the European Climate Foundation and the former chief climate negotiator for France in the United Nations climate talks, said in an emailed statement.