The View | Global trade rules should not get in the way of national decarbonisation efforts
- Government programmes that promote sustainable production at home have been criticised for pricing out global competitors
- But given the urgency of the climate crisis and lack of global cooperation, national initiatives may be the best way forward, regardless of their impact on trade
Late last month, a foreign leader accused US President Joe Biden of pursuing “super aggressive” industrial policies. It was not Russian President Vladimir Putin or Chinese President Xi Jinping, whose countries are America’s main geopolitical rivals. Nor was it Iranian President Ebrahim Raisi or Venezuelan President Nicolas Maduro, whose countries have struggled under the weight of US-led sanctions.
Qualifying for these subsidies requires firms to source critical inputs from US-based producers, which irks Macron and other leaders, who claim that the new legislation undermines European industry. “The consequence of the IRA,” Macron put it bluntly, “is that you will perhaps fix your issue but you will increase my problem.”
The goal is to maintain a high domestic price for carbon without allowing foreign firms to undercut European producers through cheaper imports. But the import duties will also hurt many lower-income countries such as Mozambique, Egypt and India.
European officials argue that the CBAM differs from the IRA because it does not violate a fundamental principle of the multilateral trade regime: non-discrimination. The mechanism, they claim, aims merely to level the playing field between European companies, which are subject to high domestic carbon prices, and foreign producers, which are not.
