EU Trade chief rejects Kyoto Border Tariff for Non-Kyoto Parties

[By Andrew Bounds in Brussels] The European Union’s trade commissioner Mandelson will today dismiss French proposals for a “green” tax on goods from countries that have not ratified the Kyoto treaty as not only a probable breach of trade rules but also “not good politics”. Peter Mandelson says that the levy, aiming to cancel the competitive advantage of countries that are not cutting carbon emissions to fight global warming, would be “highly problematic under World Trade Organisation rules and almost impossible to implement in practice”. The proposals are gathering support after Günter Verheugen, industry commissioner, backed the idea after it was separately proposed by an advisory group of EU government officials and industry leaders (high-level group on competitiveness, energy and environment) he co-chairs.

“Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules,” Mr Mandelson will warn in a podcast speech to 50,000 subscribers. “How would we choose what goods to target? China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not ratified but states like California have ambitious climate change policies.” Above all, he says, it would undermine the international co-operation required to combat climate change. Coercive policies will harm this. Collective responsibility will only be fostered by policies of dialoge, incentive and cooperation," he continued. The Kyoto Protocol contains a "hidden imperative" to create an open market in green goods and services, Mandelson argued, and saw large potential for Europe to be an early mover in the "direction the market is inevitably going to take, and getting ahead of the curve." "Alongside an ambitious agreement to cut tariffs in industrial goods from the Doha round, WTO members should agree to go even further in key areas like clean power generation – defined by their specific link to climate change. It should be possible to agree a zero per cent tariff deal for these goods," Mandelson said.
Dominique de Villepin, the French prime minister, embraced the idea last month amid fears that EU efforts to curb emissions are driving up power prices and industrial costs. In contrast, Mr Mandelson backs a plan, to be unveiled this week, to include in the EU’s carbon emissions trading scheme all airlines landing or taking off in the EU, even though it is likely to antagonise the US and Asian countries.
Mr Mandelson, who favours a positive rather than punitive approach, is also writing to Pascal Lamy, WTO director-general, to suggest talks on scrapping tariffs on renewable energy and clean power generation equipment worldwide. He also wants extra incentives for companies using environmentally sustainable methods to be built into a new generation of bilateral deals the EU is negotiating. Mr Mandelson says the rich world has “an historical environmental debt”, having contributed to 80 per cent of carbon emissions worldwide to date, and must lead the way. He accepts there will be some pain in the short-term for industry but this could be offset by services growth selling European environmental know-how.
What he calls “climate security” is the biggest political challenge of the day. In early January, the European Commission will launch an energy policy, based on market liberalisation, efficiency savings and a faster shift to renewable sources and cleaner technology.