The Pitfalls Of The EU's Climate Change Policies

We are not sure that Michael Richardson, writing in the NZ Herald today, has all his facts right. Our understanding is that the EU is not proposing a border tax adjustment as part of its emissions trading policy (some in France had proposed this but it is not mainstream EU policy) - and we have posted recently on the difficulties that the US would face if it headed down the same path. Nevertheless we feel it important to draw attention to comments that Richardson is making as we agree with his conclusions about what would happen should border tax adjustments be made by WTO members trying to keep their industries internationally competitive after emissions trading schemes or carbon taxes are introduced.

The European Union aims to become the world's leader in the fight against global warming and climate change.

But in doing so, it may trigger a green trade war of retaliation and litigation from China, India and other leading carbon polluters in lower-cost Asian economies that refuse to follow the new environmental and energy use standards set by Europe and perhaps soon by the United States as well.

If this were to happen, it would complicate the plans of Australia and New Zealand to make themselves honest brokers between developed and developing countries in the contentious international negotiations on climate change.

It would also undermine the multilateral trading system policed by the World Trade Organisation (WTO) and add momentum to protectionist pressures that already pose a significant challenge to the open international trade regime that has helped bring prosperity to the Asia-Pacific region.

It should be noted that the emissions trading regime currently being considered by the NZ Parliament is far more comprehensive and draconian than that being considered in the EU. The impact on company competitiveness is also likely to be far more severe.