John Hontelez, secretary general of the European Environmental Bureau, has written a great piece on Border Tax Adjustments (BTAs). Essentially, goods from rich countries that haven’t ratified the Kyoto Protocol, like the US and Australia, would be taxed upon entry in the EU. Why? Complying with the Kyoto Protocol will raise operational costs for companies in the EU, and consequently the prices of the goods they manufacture – BTAs, would inflate the cost of goods from countries without such climate change legislation, and therefore create a more level playing field for the higher-cost European goods to compete in. Whether or not such BTAs would violate the WTO has yet to be determined (they probably would be prohibited under the WTO – the question is whether a exception would be granted as climate change is such an important global problem):
With rapidly mounting signs that carbon dioxide emissions cause global warming, how should we deal with countries which haven’t ratified the Kyoto Protocol and don’t impose a “carbon charge” on their exports?
These countries unfairly favour their own goods and discriminate against nations that do apply such a charge, as the European Union is doing with its Emissions Trading Scheme, and some of its members with carbon taxes.
Can we rebalance the economic burden of shifting to a low-carbon society?
Border Tax Adjustments (BTAs) might be the answer which allows the EU to develop responsible climate policies without having to wait for other countries.
They would result in products imported from the US being taxed to compensate for resulting differences in production costs. Thus EU firms would be protected against unfair, carbon-careless competition from outside.
[BBC]