Read on Twitter
Yesterday, the European Council agreed on a new 7-year budget and #COVID19 recovery package, which include multiple #ClimatePolicy elements, featuring climate investments, transition aid, #CarbonPricing improvements, and CO2 border adjustments.
A brief breakdown
...
A brief breakdown
...
Big picture: This agreement is historic because it allows for the first time the EU Commission, the executive arm, to raise debt on behalf of the entire EU. Macron called it the "most important moment since the creation of the euro". https://www.bloomberg.com/news/articles/2020-07-21/macron-says-france-to-get-46-billion-from-eu-stimulus-deal?sref=iAWraYPK
This is a big step toward the integration of the EU, but it's also not quite Hamilton's US debt mutualization in 1790. Something like that would require deeper EU treaty changes. Germany calls the mutual debt (which is for recovery purposes) a one-off. https://www.bloomberg.com/news/articles/2020-07-21/why-europe-s-pandemic-recovery-deal-is-a-big-deal-quicktake?sref=iAWraYPK
On to climate, the plan says that 30% of the new 1 trillion EUR budget and the 750 billion EUR COVID package should be spent on climate. Tying the budget to climate is another unprecedented aspect of this deal, though how this will be achieved is a Q. ($) https://carbon-pulse.com/104432/
The new budget includes a 10 billion EUR Just Transition Fund, initially proposed by the Commission's European Green Deal in January. https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_931
The plan is to cover the additional spending with new revenue some of which is to come from environmental or climate taxes. These include:
- non-recyclable plastics tax from 2021
- CO2 border adjustment mechanism from 2023
- Revenues from expanding the #EUETS (to ships, e.g.)
- non-recyclable plastics tax from 2021
- CO2 border adjustment mechanism from 2023
- Revenues from expanding the #EUETS (to ships, e.g.)
The CO2 border adjustment mechanism (CBAM) is an exciting idea I have written in favor of before (e.g. https://therift.eu/index.php/2019/09/24/should-the-eu-tax-imported-products-accordingly-to-their-co2-footprint/). It would alleviate climate cost concerns and thus allow more ambitious EU climate policy. Not to mention the resulting leverage on other nations.
It is worth noting that the document is merely an agreement to consider a CBAM in the future. The language is very different from the language concerning the plastics tax. The latter uses “will” while the former talks about a future proposal “with a view” to eventual introduction
The plan for the #EUETS (EU's cap-and-trade) is to explore ways to strengthen it in the future. The EU Commission is currently scheduled to put forward proposals on sectoral expansion, revising the Market Stability Reserve (i.e. price management) and CBAM next spring.
Some of these measures will go through EU's ordinary legislative procedure (thus requiring a qualified majority of member state approval, as well as majority Parliamentary approval). It is unclear how the CBAM will be handled and if it majority agreement will be enough.
This will depend on how the CBAM is designed. If it is put forward as a tax at the border that would require unanimity as all EU tax proposals do. But it could also be in the form of an obligation on foreign firms to buy EU CO2 allowances, which may not require unanimity.
Speaking of unanimity, this budget itself was agreed unanimously. This means that what it says carries quite a bit of weight as far as future EU planning and lawmaking is concerned. It speaks authoritatively as to the will of EU's nations.
Overall, this is a landmark agreement for the EU, its economy, and the climate. Negotiations took enormous effort and almost broke down several times throughout the process. A great example of very diverse nations coming together to solve complex common problems. /end
P.S. and here is the text of the actual document, which I forgot to link before. https://www.consilium.europa.eu/media/45109/210720-euco-final-conclusions-en.pdf
P.P.S. Also check out this great and detailed thread by @DrSimEvans https://twitter.com/drsimevans/status/1285933174342717441?s=21 https://twitter.com/drsimevans/status/1285933174342717441
Looks like @DrSimEvans and I agree on the softness of the carbon border adjustment language in the EU budget deal. https://twitter.com/drsimevans/status/1285935402361270275?s=21 https://twitter.com/drsimevans/status/1285935402361270275
