OPINION: How CBAM could knock the wind out of our sails

Because industries in the EU have to pay a carbon tax on producing such materials, it makes them more expensive than imported materials that don’t suffer the same penalties.

European industry justifiably believes this is unfair, so the EU has slapped the same penalties on imported materials in what it calls the Carbon Border Adjustment Mechanism (CBAM), so that they are just as expensive as domestic ones – hence the competition is evened out and everything is more expensive for everyone.

As a non-member of the EU, the UK could have taken advantage of cheaper imports because it didn’t have to slap a similar carbon tax on anything – but in its wisdom, it has. 

At the moment the CBAM is just an administrative headache, because fiscal penalties have not yet been decided (they will be); but ‘embedded’ carbon in products from non-EU countries will, from next year, have to be calculated.

Ultimately it will mean, says a report commissioned by WindEurope, that the price of a single wind turbine – yes, just one – could rise by €900,000.

Some might think this rather counter-intuitive: weren’t wind turbines supposed to be one of the answers to climate change?

It’s not fair, the EU says, that EU producers have to pay a carbon tax on their products, making them more expensive and less competitive, when non-EU countries’ products are cheaper and could damage the EU’s industries.

It relates in the first instance to a handful of materials (all vital in the commercial marine sector of course) that are deemed bad for the planet because of the CO₂ emitted while they are in production.

It inevitably won’t end with these materials, and one of the many ironies of the CBAM is that the very industries that have been created to curb emissions – ie wind turbines, electric vehicles, batteries – are going to be punished for trying to do just that.

“This is a pivotal element in the new strategy to prevent carbon leakage and ensure that imported goods are subject to the same costs as those produced in the EU, maintaining the competitiveness of our domestic industries while advancing our climate cause,” said Laura Casuscelli, senior advisor for Trade and Industry with WindEurope, in a recent webinar.

And in responding to Maritime Journal’s queries about the measure, press officer Saul Goulding, with the ‘EU-UK Agreements, Taxation and Customs, Foresight and Inter-institutional Relations, Democracy and Demography’ department, said: “The EU’s CBAM is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.”

Aside from implying that non-EU countries’ industries are ‘worse’ than those in the EU, the fact is that many of them are already putting their own taxes on carbon emissions, so they are already heading in the same direction.

And what about the non sequitur of penalising industries that supposedly exist to combat climate change, ie wind turbine makers?

It’s impossible to know where to draw the line, said chief policy officer with WindEurope Pierre Tardieu during a phone call after the WindEurope webinar.

In other words, administering exemptions for ‘clean’ industries could possibly be even more arduous than the administrative procedures now being forced on industries under the CBAM, and indeed, this is a whole other headache.

Exactly how are ‘embedded’ carbon emissions calculated? How far down the supply chain does it go – will the bricks that made the factory have to be assessed? Who calculates it? Will it have to be checked? Will the checkers have to be checked?

As we’ve seen in the UK: if building wind farms is not profitable, industry won’t build them – as evidenced by last year’s auction round, which did not receive a single bid by wind farm developers. Ultimately the energy price cap had to be raised.

If the price of a single wind turbine goes up by nearly €1 million, what developer in their right mind would buy 100 of them to build a wind farm? And the ripple effect is on all the vessel builders and manufacturers that will not be needed either.

The European Union and UK politicians are elected to represent the people and businesses they rule over – and this continual implementation of harmful policies will not do what it is claiming to do – protect their own industries.