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CERAWeek: EU’s carbon border tax “signal” to trading partners

02 March 2021 Cristina Brooks

The EU's net-zero emissions efforts are being felt globally as companies buy its exported energy technologies and prepare for the potential roll-out of carbon-linked import tariffs, according to a panel at CERAWeek by IHS Markit.

The European Commission's cross-border tariff proposal strives to maintain the bloc's industrial competitiveness, even as it plans to further regulate industry to reach its net-zero emissions target for 2050 this summer, according to European Commissioner for Energy Kadri Simson.

Simson said the impact assessment for the planned tariff, called the carbon border adjustment mechanism, was ongoing and politicians would reach a decision on the policy in the summer months.

"The [EU] represents less than 9% of global emissions, so as we apply stricter standards to our own companies, we cannot ignore that. We do not want to penalize our companies without getting any real benefits," said Simson. "And this is why we are working on a carbon adjustment mechanism to reduce the risk of carbon leakage, and to make sure that the price of imports reflects [non-EU companies'] carbon content."

The import tariff will consider companies' use of green energy and carbon emissions. "We do not apply to others what we do not apply to ourselves through carbon pricing. And, of course, we will do our best to promote green efforts and support clean energy," said Simson.

"We want to safeguard the EU economy from unfair competition, but also to promote climate ambition in our trading partners. And the more our external partners are choosing their own path towards decarbonization, the less a carbon border adjustment will be needed," said Simson.

Simson believes the looming tariff will enable the EU's trading partners to start cutting carbon now. "I think even before that, the message is clear for our partners, and the level playing field is now a priority for many other governments too. So the message is even more important than the actual legislative proposal," said Simson.

Companies export net-zero technology

French energy and automation technology company Schneider Electric aims to be fully carbon neutral across its supply chain by 2050, while helping clients to do the same. "The technologies that we have today already allow it. We have to rethink the way we design projects," said Schneider Electric CEO Jean-Pascal Tricoire.

Schneider Electric is working with Houston-headquartered oil field services company McDermott International and UK-based firm IO Consulting to design a proof-of-concept for a net-zero offshore platform that combines several technologies.

Likewise, Norwegian state-backed energy company Equinor has set its sights on becoming a net-zero company by 2050, specifically under the Greenhouse Gas Protocol's Scope 3, which will include the emissions of end users of its products. This is the most difficult level of emissions reduction for oil and natural gas producers to attain because it invloves tough decisions around changing their products or their use by clients.

Equinor is already cutting emissions in both its wind energy and oil and gas segments. "There will be technology coming up that will reduce emissions even further in the future, but we cannot wait for the perfect solution," said Anders Opedal, Equinor CEO.

"Let's use the technology we have today. We are using that in building wind parks in several places across the world, and we are using the current technology to reduce emissions in oil and gas production, but at the same time, we dare to invest in technology, knowing that some of the technology we are investing in will be obsolete some years into the future, but I don't think we can actually afford [to be] waiting on it," Opedal added.

Equinor recently began to market blue hydrogen in Western Europe with French energy and services company Engie and is a partner in Norway's Northern Lights carbon capture project. Equinor's own net-zero target serves as a model for industrial and energy sector companies that are likely customers of these ventures.

Posted 02 March 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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