EU Launches World’s First Carbon Tariff

Weekend Update:

California Governor Gavin Newsom completed his promise of signing SB 253 & SB 261 into law this weekend, marking the first climate disclosure rule in the nation.?

Although he did sign both, saying SB 253 “demonstrates California's continued leadership with bold responses to the climate crisis, turning information transparency into climate action,” and SB 261 “illustrates the real risks of climate change for businesses operating in California and will encourage them to adopt practices that seek to minimize and avoid these risks.”

He conceded that SB 253 “could result in inconsistent reporting across businesses subject to the bill,” possibly a reference to Scope 3 (indirect emissions). He also said that he is worried about the bills' implementation timing and financial impacts and will closely monitor those impacts, and his team will work with the bills' authors to iron out these issues.?

EU Launches World’s First Carbon Tariff

The EU has officially launched the first phase of its Carbon Border Adjustment Mechanism (CBAM), the world’s first carbon tariff.?

The first phase of the CBAM targets imports of emissions-intensive products, including iron, steel, cement, aluminum, electricity, fertilizers, and hydrogen. If imported materials in these categories have higher carbon intensity (the emissions associated with producing the material) than similar EU products, the importers will have to buy certificates from the European Emissions Trading System (ETS) to cover the excess emissions.

The tariff could eventually cover 2.5% of global emissions and could raise more than US$80 billion per year by 2040. This initial phase, which began on October 1st, means EU importers will have to start collecting data on the embedded emissions and report by January 31st of 2024. Companies will be fined up to 50 euros per ton of CO2 if they don't report.

However, companies will not have to start paying the tariff until 2026. The payments will be in line with the fees EU companies pay under the EU’s Emissions Trading System (ETS). The goal is to put producers from outside the EU on an even footing as EU manufacturers, incentivizing them to decarbonize and to stop ‘carbon leakage’ - i.e., when EU companies offshore their operations to places with less stringent emissions rules.

Exporter countries like China and Ukraine say that the cost of adapting to products with lower emissions is too high and will affect how competitive they can be in the EU market, undermining free trade. European Economy Commissioner Paolo Gentiloni says that is not the aim, "CBAM is not about trade protection. It is about protecting the EU's climate ambition – and seeking to raise the level of climate ambition worldwide."?

In the UK, Prime Minister Rishi Sunak was criticized for weakened climate policies. A new article noted that the rollback caused the UK price of carbon to plummet and, with CBAM, UK companies will be siphoning hundreds of millions into the EU, which would have been filling UK treasury coffers. Marcus Ferdinand of Veyt said, “UK industry will still be paying for emissions on exports to the EU, but instead of taxes going to the Treasury, they will be heading to Brussels.”

Could The U.S. Be Next?

In the highly polarized politics of the US, carbon import tariffs enjoy rare bi-partisan support. Senator Bill Cassidy (R-LA) introduced a bill earlier this year called the “Foreign Pollution Fee,” aimed at giving domestic U.S. manufacturers a helping hand against cheap Chinese imports.?

Cassidy said the legislation “would curtail China‘s ability to undercut U.S. manufacturers by penalizing China for not meeting the same reasonable environmental standards to which domestic manufacturers are held.”?

Democrats released a similar bill, the “Clean Competition Act,” which would also charge domestic companies if their emissions were above industry averages. Also, the bi-partisan “PROVE IT Act” would study the carbon intensity data of U.S. industries compared to other countries as a precursor for a future carbon tariff.

With a leadership crisis in the US House of Representatives and a looming budget deadline, this issue isn’t likely to break through any time soon.?

New Climate Chief Wants EU To Go Further

Former Dutch Foreign Minister and Shell employee Wopke Hoekstra looks set to become the next EU climate chief. After receiving a grilling from the EU’s environmental committee about his links to oil and gas and commitment to climate change, he made his position clear: “Fossil fuels must become history, the sooner the better.”

Hoekstra and Maro? ?ef?ovi? - who is leading the Commission’s work on the European Green Deal - aim to expand on the EU’s climate ambitions. Hoekstra has suggested introducing a global kerosene tax (a fuel used in aviation) to help build funds for the long-promised “loss and damages” fund. “I want to explore an international kerosene tax, a maritime levy, a fossil fuels tax, even a share of [the EU emissions trading scheme] proceeds — no stone should be left unturned,” said Hoekstra. Both Hoekstra and ?ef?ovi? would also support an EU target of cutting emissions by at least 90% by 2040.

Climate Crisis Also A Health Crisis

After a summer of unhealthy air due to the unprecedented Canadian wildfires (which this week got as far south as Florida), the Climate crisis is turning into a health crisis.?

It’s not just particulate matter from fires that are having ill effects. Tropical diseases are also moving to new places. France has seen its first-ever cases of Dengue fever, and cholera is on the rise as flood water contaminates drinking water. Deaths from Malaria, which have been steadily declining over the last couple of decades, increased this year as hotter temperatures expanded the areas where mosquitoes can breed.? Neil Buddy Shah , head of the Clinton Health Access Initiative, said, “Everything from air pollution to extreme weather events to chronic weather changes will result in harm to human health.”

A Melting September

For the fourth month in a row, this September was the warmest ever.? Also, a new study revealed record low Antarctic sea ice.

September was “gobsmackingly hot” on average; it was 1.7°C hotter than pre-industrial times, exceeding the Paris Agreement’s 1.5°C, thankfully only temporarily. And in Antarctica, as winter turns into summer, sea ice has seen its lowest peak by a large margin, as shown above. Climate scientist Ariaan Purich said, “The ice this year is so far out of the range of all the other years that it’s a really exceptional year.”

New York Submerged

Just after New York Climate Week, a storm dumped a month's worth of rain in just a few hours, bringing widespread flooding to New York City. A “rapid attribution study” found that the storm was made up to 20% wetter because of climate change.?

As New York City experiences wetter winters and dryer summers, flooding is becoming more commonplace, and the city is struggling to adapt quickly enough. The city’s Chief Climate Officer, Rohit Aggarwala , envisions the city’s future infrastructure as permeable, a so-called ‘sponge city,’ and able to deal with future floods. But for now, it's not quite there, he said, “Everything the science tells us is that it’s going to get worse before it stabilizes… Climate is changing faster than our infrastructure can keep up.”?

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?

Other Notable News:

• Pope Francis has issued an urgent call for radical climate action. The pontiff, in an update from his 2015 call to action before COP 21, scorned those who “have chosen to deride” facts and asked for more action at COP 28.??
• Emmanuel Faber - Chair of the International Sustainability Standards Board (ISSB) - emphasized financial metrics as the key drivers for achieving sustainability goals. By focusing on the financial implications of climate and sustainability risks, the ISSB aims to compel businesses to make meaningful changes.
• Austrian Airlines was found guilty of greenwashing over carbon-neutral flight claims. The court found that the airline misled the public on its claims of CO2-neutral flights that used 100% sustainable aviation fuel (SAF), finding that the flights used at most 5% SAF.
• While supporters of sustainable investing are making progress against GOP-led anti-ESG efforts, key financial big guns, like BlackRock, that once championed ESG principles are notably missing. This silence from Wall Street big-hitters complicates the efforts of sustainable investment advocates, who are trying to form a unified response against expected attacks on ESG in 2024.
• A new study reveals that more than half of the emissions from planned oil and gas expansion through 2050 will come from just five countries. The UK, US, Canada, Australia, and Norway will emit 51% of global emissions related to oil and gas expansion through 2050, yet all have net zero ambitions.
• This week, in extraterrestrial pollution, the U.S. issued its first fine for space junk. Dish Network was fined $150,000 for failing to move an old satellite far enough away from others in use.

Notable Podcasts:?

• I was featured on an episode of BFM 89.9’s People, Planet, Profit podcast where, along with host Shazana M. , we discussed the anti-ESG backlash and how the debate over ESG could play out amid updated standards of reporting.?
• I was also a guest on this week’s Eco Money podcast with host RACHEL KELLY . Together, we discussed how corporations can best navigate ESG in this challenging time and confusion around ESG ratings.
• In this week’s episode of Invested in Climate, host Jason Rissman recaps on New York Climate Week. Guest appearances from Former Vice President Al Gore and California Senator Henry Stern share their highlights and insights.