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Carbon row heads to the World Trade Organization

South Africa and India have accused the EU of using environmental issues as a cover for protectionism in its new CBAM

African countries are set to raise formal complaints about the effects of some of the European Union's new laws on environmental protection and carbon at this week's Ministerial Conference of the World Trade Organization (WTO) in Abu Dhabi.

South Africa and India are expected to accuse the EU of using environmental protection as a cover for protectionism in the design of its new Carbon Border Adjustment Mechanism (CBAM), a carbon levy that will apply to imports of a group of products including steel, cement, iron and aluminium.

The Ministerial Conference – held every two years – is the WTO's highest body.The levy was designed by EU lawmakers as part of the bloc's push towards net zero carbon emissions. The two countries have led the international opposition to CBAM, arguing it could breach the WTO's non-discrimination principle.

The African Climate Foundation has estimated that the levy could result in a 4% drop in Africa's exports to Europe (AC Vol 64 No 13, How Brussels's green tax will hit Africa).

'Any climate justified measures [such as levies] that directly restrict market access by developing countries and LDCs [Less Developed Countries], where research shows the reduction of carbon emissions is minimal, should be avoided,' the African Group at the WTO said in a report last year.

EU officials insist that the phase-out of free allowances for carbon emissions to EU firms means that it is WTO compliant.

Others, meanwhile, are expected to raise concerns about the EU's new law on deforestation which will require companies selling products using commodities such as cocoa, coffee and timber, to prove at all stages of their supply chain that their manufacture did not lead to deforestation. The law will enter into force later this year.

Ethiopia has already indicated that it will ask Brussels for more time to prepare its farmers, particularly in the coffee sector, to comply, amid concerns that the compliance costs could encourage large firms to buy from larger commercial farms rather than smallholder farmers. Brazil, another major coffee producer, accused the EU of failing to consult other countries when drafting the new law.

 



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