Climate change trade war

Posted by Daniel Cressey on January 22, 2008

The Great Beyond - January 22, 2008

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Europe and the US could be headed for a trade war over climate change.

In a speech yesterday José Barroso, president of the European Commission, said he would be ready to force companies outside the EU to buy carbon allowances to ensure that companies inside were not disadvantaged by Europe’s tougher emissions targets (speech).

While this apparently went down well with the audience (of European businessmen) it hasn’t gone down so well with America.

Reuters highlights that US Trade Representative Susan Schwab said that an earlier version of the EU plans seemed to be an excuse to close the European market and amounted to something like protectionism. More worryingly, the notes for speech delivered by Schwab last week contains the statement, “The unilateral imposition of restrictions can lead to retaliation, and dramatically impact economic growth and markets worldwide – while accomplishing nothing or worse when it comes to advancing environmental objectives.”

The US approach has also been backed by the UK, most recently by energy minister Malcolm Wicks saying today the government was “against any measures which might look like trade barriers” and warning that some in Europe “could use this as a kind of secret weapon, as it were, to bring about protectionism” (listen to Wicks on BBC or read his comments on Reuters). Barroso also appears to be picking a fight with his own trade commissioner, Peter Mandelson. Mandelson is on record as saying the restrictions are not the way forward (BBC)*.

France’s leader Nicolas Sarkozy has been banging this drum for a while, telling Nature before he was elected last year last year, “Countries that behave like stowaways hitching a free ride, making no effort to reduce their emissions, should not continue to benefit from the competitive industrial advantage this gives them.”

However Barroso’s forthright speech – made in the face of British opposition – represents something of a ratcheting up of the rhetoric level. In the current economic climate any excuse to shore up their own country’s economy at the expense of someone else’s is not going to be overlooked by politicians.

This one could run and run.

*That Mandelson quote in full: “I don’t believe trade restrictions are the way forward to combat climate change. They’re not cost efficient, they carry a risk of retaliation, they would result in increasing cost for European industry at large.”

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