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Minister says planned EU carbon tax could 'disrupt world trade'
Indonesia has cautioned about a potential disruption to world trade in response to the European bloc's plan to impose a carbon tax on imported goods from 2026.
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Trade Minister Muhammad Lutfi gestures during a press conference in Jakarta on Jan. 11, 2021. (Courtesy of the Trade Ministry/-)
T
he European Union’s plan to impose a carbon border tax on imports could disrupt global trade, according to Trade Minister Muhammad Lutfi.
The EU introduced this month the Carbon Border Adjustment Mechanism (CBAM) to meet its emissions reduction target by 2050 and address what the bloc calls “carbon leakage”, or “the situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints” according to the published definition of the European Commission.
The carbon tariff on imported goods is to start from 2026, first applied to cement, iron and steel, aluminum, fertilizer and electricity.
The EU said that Canada and Japan were planning similar a carbon border tax as the world marched toward more ambitious climate goals.
The United States was mulling over a similar plan, according to Lutfi, who said the EU’s planned tariff was a move to “adjust” production costs in emerging economies, which were lower than in Europe.
“We think this will disrupt world trade,” Lutfi told reporters at a virtual briefing on Monday. “But we will see whether it violates the fair trade rules of the [World Trade Organization].”
Iron and steel, for example, are major export commodities for Indonesia that booked 32.31 percent month-to-month (mtm) growth to reach nearly US$2 billion in June. Iron and steel exports accounted for 10.72 percent of the country’s total export goods.
