At the twenty-first United Nations Climate Change Conference in Paris (COP 21) in 2015, 195 countries signed a framework agreement to reduce anthropogenic greenhouse gases (GHGs). It stipulates that each country sets a national CO2 emissions reduction target (the INDC). States have pledged to check every five years (for the first time in 2023) whether and to what extent they have achieved their self-determined nationally determined contributions.
In the negotiations following COP 21, agreement was not reached on some critical points of the agreement (review and further development of INDCs, penalties for non-compliance). However, declarations of intent without objective controls and the possibility of sanctions are unlikely to be sufficient to achieve the desired reduction in global carbon dioxide emissions.
The economic costs of achieving INDCs vary from country to country. Thus, the reluctance of individual countries regarding the level of NDCs or the rejection of binding quantitative restrictions on national CO2 emissions is understandable. Due to economic considerations and lack of alternatives, the energy demand for future macroeconomic growth rates hoped for by developing and emerging countries will require long-term burning of fossil fuels and lead to increased carbon dioxide emissions.
free racer effects
With the agreement based on voluntary commitments, runners are expected to be free. Any country can benefit from measures taken by other countries to reduce carbon dioxide emissions without having to contribute significantly to the costs of achieving the global goal (the problem of the commons). If only individual countries or groups take measures to reduce emissions (such as higher taxes on carbon dioxide, bans on certain pollutants), then carbon dioxide emitters migrate to countries with less stringent regulations (carbon leakage). Globally, this does not reduce carbon dioxide emissions, but only changes and possibly increases them.
Returning to the agreement, the United States took the initiative to clarify open questions related to the review and further development of Intended Nationally Determined Contributions (INDCs) and to create conditions for global cooperation in efforts to reduce anthropogenic CO2 emissions. At a conference initiated by the USA, several countries or groups subsequently committed to an incremental reduction in anthropogenic CO2 emissions originating on their territories, and in some cases, to a net-zero target as of 20xx. However, these goals still do not take into account the carbon dioxide emissions these countries or groups of countries cause in the rest of the world.
To date, it has not been clarified how the necessary cooperation in CO2 emissions reduction, monitoring and enforcement measures can be coordinated around the world. For the foreseeable future, no global emissions trading system or a global carbon dioxide tax will be agreed upon. So there will be countries that do not adhere to significant limits on CO2 emissions, do not comply with their NDCs, continue to produce intensive CO2 and impose little or no CO2 taxes. The EU Commission therefore intends to penalize countries that do not charge enough CO2 emissions and/or CO2-contaminated goods with border adjustment fees (CO2 import taxes) in the future. The burden of border adjustment taxes on imported goods and services for carbon dioxide emissions generated in the exporting country during raw material extraction, energy conversion, production and transportation will be justified by the free rider problem and EU health protection. Although such measures are enshrined in the WTO statutes, the different treatment of WTO members violates the principle of non-discrimination and may violate some free trade agreements concluded by the European Union.
The main problem with the introduction of border adjustment fees is the lack of detailed information on carbon dioxide emissions from goods imported outside the EU. National tax burdens vary greatly from state to state, individual states only impose regional or local taxes on states, and carbon dioxide emissions are usually not fully recorded. However, the US also wants to use the climate protection argument largely in the future to protect its economic and geopolitical interests. However, only so far have they declared that countries that do not participate or participate insufficiently in reducing global carbon dioxide emissions should account for poor trade in goods and services. It could, for example, raise the trade advantages granted so far and create new technical barriers to trade.
Free trade is in danger
The weakening of exports from developing and emerging countries through border adjustment duties to importing EU countries does not take into account that the increase in CO2 concentration in the Earth’s atmosphere is due primarily to anthropogenic CO2 emissions caused by industrialized countries in the past. Reducing the economic development opportunities of developing and emerging countries due to their current emissions of carbon dioxide, which is justified by climate protection, is therefore a new form of protectionism, even if the European Union and the United States of America provide some of these countries with financial means and technical assistance to reduce them. Subsidizing carbon dioxide emissions.
The European Union and the United States are clearly trying to use the climate protection argument to legitimize interventions in global trade relations and accept that rules-based regimes agreed upon in international agreements (such as the World Trade Organization) will continue to erode. Potential lawsuits over violations of WTO rules are unlikely to bode well for the time being because the WTO arbitral tribunal remains outlawed. Therefore, those affected by the trade disruptions will have to resort to counter-reactions. However, historical economic experience shows that trade wars ultimately harm everyone involved. “A global emissions trading system will not be agreed upon for the foreseeable future,” Bernd Scheps was Professor of Economics at ETH Zurich.
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