The President of the European Commission, Ursula von der Leyen, has announced that the EU is considering the introduction of a CO2 tax. It would be addressed mainly to fossil fuel producers.
The new tax would mobilise countries to comply with international climate goals, which were set out, among others, in the Paris Agreement of 2015. (e.g. limiting CO2 emissions). The announced levy would hit China the hardest.
The European Commission’s idea to introduce an additional source of financing for climate policy is also meant to be an umbrella for European companies, which, by reducing CO2 emissions, are becoming less competitive in the international market. On the other hand, the new tax could become a solid element that would finance the implementation of the European Green Deal. This project aims to minimize CO2 emissions while actively promoting renewable energy sources.
Green Deal very expensive
It is estimated that to achieve climate neutrality by 2050, member states would have to pay more than €100 billion into the EU budget. The Green Deal policy would also be financed by trading in debt securities as well as CO2 emission rights. Experts fear that this may not be enough. Therefore, the introduction of a tax on CO2 emissions may prove necessary to implement the European climate policy.
By forcing manufacturers in the Member States to reduce and eliminate carbon dioxide emissions, the European Union will expose them to enormous costs. They are therefore becoming less competitive. Therefore, a tax on CO2 emissions for producers from outside the EU would be a certain leveling of the playing field and would eliminate the phenomenon of ‘climate dumping’. The introduction of such a tax would probably help to finance the expensive decarbonization policy.
How to set an emissions tax?
EU experts have no clear solution on how to calculate the CO2 tax. One idea is to certify producers who operate in compliance with climate standards. Entrepreneurs who could not show off such a certificate would have to pay an additional fee in the form of a CO2 tax.