Carbon import levy could have negative impact

University of the West Indies (UWI) researchers are sending an early caution to the region that a supposedly well-intended European Union (EU) plan to reduce carbon emissions, is likely to become another major disruptor for Caribbean countries seeking to export some manufactured products to the EU.

Dr Jan Yves Remy, director of the UWI Cave Hill Campus’ Shridath Ramphal Centre for International Trade Law, Policy and Services (SRC), and Kaycia Ellis-Bourne an attorney-at-law and trade research intern, have spotlighted the issue in a recentlyrelease SRC document.

Last month, the EU released a Carbon Border Adjustment Mechanism (CBAM), which Remy and Ellis-Bourne noted will serve as the EU’s first carbon import levy and another of the Europeans’ attempts to bring about climate change action.

The import levy is expected to be imposed on goods produced in industrial sectors of non- European countries, that utilize significant levels of power.

These include products such as fertilizers, aluminium, steel, iron, cement, and electricity.

The Cave Hill Campus academics explained that while small island developing states (SIDS) such as members of CARICOM, and least developed countries (LECs) were exempted in the early stages of the plan, in the legislation, no such carve-out for SIDS was included.

In this connection, Remy and Ellis-Bourne argued: “While most SIDS, like CARICOM countries, do not stand to be immediately impacted by the EU CBAM proposal given their negligible contribution to global greenhouse gas emissions, at least one CARICOM country stands to be disadvantaged.”

They added: “In 2019, Trinidad and Tobago was the fourth largest exporter of fertiliser to the EU, making up 15 per cent of EU ammonia imports. As the CBAM proposal covers fertilisers, exporters from Trinidad and Tobago would need to verify their emissions, failing which default factors provided for under the CBAM will be used.

A major risk is that imports from Trinidad and Tobago will be rendered less competitive.” Also of concern to the UWI trade law experts is the potential harm to more CARICOM members if the EU tried to expand the list of industries and manufactured products that could face the carbon levy, which the EU plans to impose from 2026.

“If the EU were to extend its measures even further to oil and natural gas exports, our region – Trinidad, Suriname and Guyana in particular – could be even further affected, as would be the case if more countries were to impose their own climate-related policies,” Remy and Ellis-Bourne pointed out.

They called on CARICOM countries to “interrogate their own climate policies, as it indicates a heightened effort by the world’s leading economies to take unilateral measures with extraterritorial impact”.

In addition, they noted: “CARICOM countries’ embassies in Brussels must lobby to ensure that our interests are protected in the ongoing discussions about the EU CBAM. Although the current text does not exempt LDCs or SIDS, the European Parliament has proposed carve-outs which might be capitalised on for future iterations of the EU CBAM.” (IMC1)