Ghana gets 5 year time from EU to evade carbon border tax on its aluminium

European Union is a political and economic union of 27 member states that are located primarily in Europe and released the summarized details of its carbon border tax, stressing on other nations to validate carbon pricing by 2026 instead of countering carbon border tax.

The carbon tariff will apply to the energy-sensitive products imported into the EU from manufacturing countries with weaker environmental measures. Aluminium, iron and steel are among others that stand as the first contender for this carbon border tax.

The EU said: “The policy is designed to stop carbon leakage and the risk companies will relocate to countries with weaker regulations.”

However, multiple of the union’s trade partners are dejected by the methodology and criticized by saying “it is protectionism in a green disguise.”

On 14th July 2021, the complete details of the tax were revealed in a 291-page document. The proposals incorporate a transition phase between 2023 and the end of 2025, while during this period emissions data on imports will be assorted but tax won’t be applied.

Imports will be taxed with a reduced rate from 2026 to 2035, so that foreign producers position at a competitive match with EU producers, as they will gain an advantage from free emissions trading allowances until 2035.

Susanne Droege, from the German Institute for International and Security Affairs, said: “Five years was unlikely to be enough time for countries to develop a carbon pricing mechanism from scratch to dodge the tax.”

‘However, countries like Ukraine and Turkey, which are already developing pricing mechanisms, could finalise them by 2026.”

Developing countries like Ghana will get 5 years for all types of aluminium products and Zimbabwe for steel whose exports hugely depend on the EU.

Droege further added: “The EU should negotiate exemptions for developing countries, perhaps through a ‘de minimis’ clause where minor exporters are exempt.”

On the carbon border tax issue, the large emerging economies like China, Brazil, South Africa and India said they have serious concerns about the tax. In April 2021, in an open letter, they argued: “It was ‘discriminatory’ and will unfairly penalise developing economies, which have done least to cause climate change.”

Byford Tsang, E3G analyst said: “China has always regarded the tax as a ‘unilateral tool’ which does not respect the principle that developed and developing countries should move at different paces on climate change.”

Droege said: “Russian aluminium producers are planning to export clean aluminium to the EU and dirty aluminium to the rest of the world.”