CO2 in goods and industrial
competitiveness

By Agime Gerbeti

“If
Europe is destined to be a market, it has to be an intelligent market, one that
rewards local and imported products sharing the same values that Europe has
auto-imposed”, Cap. 7.

ETS applied both at State and industry level is an
extraordinary mechanism. It is a first experiment to achieve environmental and common
energy objectives within the EU. The emission reduction objectives has
stimulated the generation of renewables, energy efficiency and a low carbon
culture, making the European industry competitive – worldwide – as a low
emissions producer.

But the ETS has not achieved its goals. It was not
attractive to other geographic areas and the global emissions have increased
business as usual. Europe, net of the crisis, did not consume less but produced
less importing goods from emerging countries with high carbon intensity; EU is,
in fact, delocalizing production and its consumption. In addition, the tradable
allowances reached a not at “worthy” price level to encourage research and
investment. So, ETS has become some kind of (low) negotiable energy tax burden
on EU business competitiveness in the global market.

The WTO (and international policies opportunities)
does not allow the imposition of a carbon border tax.

***

This proposal is to consider, for putting into the
European market, the CO2 as a raw material used in the
production of goods, regardless of where they are produced. Enhance it in
quantity “contained” in a single product as a result of the energy
mix used. The cost of CO2 would be
administered as a charge converging in VAT.

This approach allows an enhancement of CO2,
which is free from the fluctuations of the market and from local production
crisis, that can be set at a “worthy” level for enabling research and encourage
low-carbon investments both in EU and non-EU territories. It would also create
– because of the greater efficiency of the European energy mix – competitiveness
in energy costs of production.

This approach – adopted also unilaterally by Europe –
does not violate the rules of the WTO, as long as it allows industries outside
the EU to demonstrate their energy production mix. If European standards are
respected, industries would be exempted from the charge on emissions within the
VAT.

***

In an extremely complicated context of energy and
industry – US going towards energy independence thanks to shale gas; China and
India are increasing their market shares; OPEC Countries are adopting “strong” international
policies on cost of crude oil – Europe needs to use the advantage of the low
carbon intensity of its industrial system; especially now that with the
abandonment of free allocation, the system production cost will inevitably
grow.

This could be a way to create conditions to lower
global emissions and increase environmental benefits faster than any global
agreement, (this will came surely late).

The aim is not to lower our environmental objectives but
to urge the rest of the world to follow Europe.

You can find the paper version in this link and for the electronic version (iTunes).