Tag Archives: border tax on carbon

From Lunatic to Feasible? Getting Rid of Carbon by Storing it into the Earth

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The boom in carbon removal, whether from the air , what is called direct air capture (DAC) or from industrial point sources , what is called carbon capture and storage (CCS), cannot come fast enough. The UN-backed Intergovernmental Panel on Climate Change (IPPC) assumes that if Earth is to have a chance of warming by less than 2°C above pre-industrial levels, renewables, electric vehicles and other emissions reductions are not enough. Carbon Capture and Storage (CCS)and sources of “negative emissions” such as DAC must play a part. The US Department of Energy calculates that America’s climate targets require capturing and storing between 400m and 1.8bn tonsof CO2 annually by 2050, up from 20m tons today. ..

For years DAC and CCS projects were regarded as technically plausible, perhaps, but uneconomical but carbon capture, utilization and storage (CCUS) may attract $150bn in investments globally this decade. A factor behind the recent flurry of carbon-removal activity is government action. One obvious way to promote the industry would be to make carbon polluters pay a high enough fee for every ton of carbon they emit that it would be in their interest to pay carbon removers to mop it all up, either at the source or from the atmosphere….The emerging view among technologists, investors and buyers is that carbon removal will develop like waste management did decades ago—as an initially costly endeavor that needs public support to get off the ground but can in time turn profitable…

Maybe the biggest sign that the carbon-removal business has legs is its embrace by the oil industry. Occidental is keen on DAC. ExxonMobil says it will spend $17bn from 2022 to 2027 on “lower-emissions investments”, with a slug going to CCA…Equinor and Wintershall, a German oil-and-gas firm, have already secured licenses to stash carbon captured from German industry in North Sea sites. Hugo Dijkgraaf, Wintershall’s technology chief, thinks his firm can abate up to 30m tons of CO2 per year by 2040. The idea, he says, is to turn “from an oil-and-gas company into a gas-and-carbon-management company”.

Excerpts from Can Carbon Removal Become a Trillion-Dollar Business?, Economist, May 27, 2023

Taxing Carbon Emissions: EU

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The European Union wants to slash greenhouse-gas emissions to 80% below 1990 levels by 2050. It is on course to cut just half that amount. To get back on track, on February 15th, 2017 the European Parliament voted for a plan to raise the cost for firms to produce carbon. It has prompted growing calls for the bloc to tax the carbon emissions embodied in the EU’s imports. At best, such a levy will barely curb emissions. At worst, it could cause a trade war.

The EU’s latest reforms try to put up the price of carbon by cutting the emissions allowances firms are granted. They include the EU’s first border tax on carbon, levied on cement imports.

Under the EU’s reforms, steelmakers in Europe would pay up to €30 ($32) to emit a tonne of carbon, but foreign producers selling in the EU would not have to pay a cent. Putting an equivalent tax on these imports is a neat solution to this problem. “It’s wonderful in theory,” says Jean Chateau, an economist at the OECD, a club of rich countries. But “in reality it’s very problematic.”

One big problem is how to calculate the carbon in imports. This is not easy even for simple steel sheets; for items made of several bits of metal from different sources, it is hellishly complex. Some countries might even refuse to provide the information. And any method brought in for foreign firms, if not applied to local ones, could fall foul of WTO rules,..

A global carbon price would produce far greater economic benefits than border taxes, but would require closer international co-operation. A trade war is not the way to get there.

Excerpts from Steely defences: Carbon tariffs and the EU’s steel industry, Economist,  Feb. 18, at 62