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China and the United States Could Sabotage EU Emission Efforts Again

Brussels needs to fight to defend its carbon-border policy.

By , a freelance China researcher, focused on European Union-China relations.
The EU unveils low-carbon economy policies.
(From left) European Commission Vice President Frans Timmermans, European Commission President Ursula von der Leyen, and EU Commissioner for Economy Paolo Gentiloni unveil proposals to govern transitions to low-carbon economies during a press conference at the European Parliament in Brussels on July 14. John Thys/AFP via Getty Images

When it comes to environmental governance, the European Union is one of the most ambitious actors in the international arena. Sustainability has always been a cornerstone of its policies, and Brussels takes pride in being recognized as a “leading proponent of international action.”

However, despite a high level of domestic undertaking, the ambition and success of European green policies increasingly depend on other countries’ commitments to reduce carbon emissions. If Brussels aspires to be a catalyst for international action, diffusing its policies to third countries, it needs to convince others to follow its lead toward a more sustainable future. One big way to do that is the Carbon Border Adjustment Mechanism (CBAM), a policy introduced this July but has faced substantial opposition from both Beijing and Washington.

European Commission President Ursula von der Leyen has made clear that reducing greenhouse gas emissions faster represents an unavoidable priority. The commission has said its flagship project, the European Green Deal, aims to reconcile the economy with the planet, so Europe’s “man on the moon” moment paves the way for European global leadership on green matters.

When it comes to environmental governance, the European Union is one of the most ambitious actors in the international arena. Sustainability has always been a cornerstone of its policies, and Brussels takes pride in being recognized as a “leading proponent of international action.”

However, despite a high level of domestic undertaking, the ambition and success of European green policies increasingly depend on other countries’ commitments to reduce carbon emissions. If Brussels aspires to be a catalyst for international action, diffusing its policies to third countries, it needs to convince others to follow its lead toward a more sustainable future. One big way to do that is the Carbon Border Adjustment Mechanism (CBAM), a policy introduced this July but has faced substantial opposition from both Beijing and Washington.

European Commission President Ursula von der Leyen has made clear that reducing greenhouse gas emissions faster represents an unavoidable priority. The commission has said its flagship project, the European Green Deal, aims to reconcile the economy with the planet, so Europe’s “man on the moon” moment paves the way for European global leadership on green matters.

With the European Green Deal, the 27-nation bloc intends to cut carbon emissions across its economies and societies, accelerating a low-carbon transition to halve greenhouse gas emissions by 2030 and become the first climate-neutral continent by 2050. These unprecedented commitments reinforce the idea of European leadership in global environmental governance, with Brussels setting the pace of global climate policy.

The European Union has regularly called on both the world’s biggest polluters—the United States and China—to increase their climate ambitions. But support has been lackluster at best from the world’s superpowers.

The CBAM has caught the most international attention from the measures put forward. The CBAM intends to increase the cost of carbon-intensive imports from countries with laxer climate rules, preventing EU companies from moving production to less climate-stringent nations and making sure businesses face fair competition in the single market.

The overall effect on importers is projected to be very small. Across imports, the total net CBAM cost should be around $1 billion in 2026 and $1.6 billion in 2035 from the EU’s major trading partners: the United States, Turkey, Russia, Ukraine, South Korea, and China. There’s been plenty of criticism regarding the move. Since its inception in 2019, the Chinese government has consistently expressed its reservations about the mechanism. China’s vice environment minister stated it would violate a core principle of international climate policy, whereby richer countries bear greater responsibility for cutting emissions.

At the April climate summit with French President Emmanuel Macron and German Chancellor Angela Merkel, Chinese President Xi Jinping himself stressed “climate change should not be used … as an excuse for trade barriers,” insisting that developed economies should set the example in reducing carbon emissions first and provide adequate support to emerging economies. Although most academic and policy circles in China have voiced concerns over the effectiveness of CBAM and its potentially negative impact, others have suggested it might accelerate the country’s carbon reduction policies. China’s diffidence is echoed by other large developing countries while Russia—projected to be the hardest hit—has also condemned the proposal and tried to lobby against it.

The United States has not welcomed the draft either. Despite putting forward “the most progressive climate strategy” in U.S. history, the Biden administration has not yet planned to start taxing industries for their carbon footprint. U.S. climate envoy John Kerry urged the EU not to move forward with the CBAM draft until after the climate change conference in Glasgow, labeling the mechanism as a “last resort.” Following the EU’s announcement, the Democratic Party advanced a proposal for a carbon border tax, but the White House has not formally endorsed it.

Much is still to be decided as the CBAM draft needs to be approved by EU member state governments and the European Parliament. Also, the mechanism is not set to become fully operational before 2026 and will initially cover only a handful of sectors.

Whether or not the proposal will gather the necessary support is a test for the EU’s ability to set norms and principles for the world’s green transition. CBAM is not the first time Brussels has been down this road.

A similar situation happened in January 2012, when the European Union extended its Emissions Trading System (ETS) to domestic and international civil aviation. All carriers, irrespective of their nationality, landing at or departing from airports in one of the member states were required to surrender one allowance per ton of carbon dioxide emitted over the entire duration of the flight. With the carbon prices at the time, the price of a one-way flight from Beijing to Brussels could have increase by roughly $12.50—but with the majority of allowances allocated to airlines for free, this would have been even cheaper, around $2.50.

Despite being adopted in 2008, fierce criticism of the legislation picked up only on the eve of its entry into full effect. The EU’s decision infuriated the international community and became a highly politicized controversy. A joint statement from Russia and China threatening punitive taxes and a declaration by a broader “coalition of the unwilling” urged the EU to move the discussion on the topic to the International Civil Aviation Organization (ICAO), recognized as the appropriate international forum.

In addition to joint efforts, a number of countries started opposing the EU individually. Washington first tried to challenge the scheme in court and then barred U.S. airlines from surrendering emission allowances when flying to and from the then 28-nation bloc. India and China instructed their respective airlines not to comply with the new ETS requirements. Russia refused to grant overflight rights to Finland’s air carrier. There’s been a lot of talk of U.S-China cooperation on climate change—but when push came to shove, what actually united Washington and Beijing was blocking effective measures by Europe.

Among the different strategies, China’s power politics and coercive diplomacy stood out as particularly persuasive. Once the chances of winning a legal battle against Brussels became “unlikely,” Beijing referred to the government for retaliatory measures. Reactions from Beijing were mostly economic in nature—to the point they raised questions about a looming trade war.

Fears of retaliation by China and other crucial trade partners were raised early on. In June 2011, a letter signed by the Association of European Airlines, Virgin Atlantic, and Airbus sent to then-EU climate commissioner Connie Hedegaard warned against such possibilities and their impact on the European labor market. At that point, worries regarding potential countermeasures also spread to member states, which were retracting their once supportive stances in favor of the aviation scheme.

Beijing’s aggressive approach culminated in the targeting of Airbus, the French airplane manufacturer. Unease already had surfaced when an expected deal between Airbus and the Chinese government did not materialize during the 2011 Paris Air Show. After the scheme began, from January to April, Beijing withheld purchases of several Airbus aircrafts, for an estimated total of $14 billion. Between March and October 2012, intense lobbying toward both national governments and the commission by European leaders and industry CEOs alike gave away ill-concealed anxiety.

As tension escalated to unprecedented levels and threats came from all sides, the union tried to save face. Confronted with mounting international pressure, Hedegaard stopped the clock for a year, pending a global deal on greenhouse gas emissions reached at the upcoming ICAO Council meeting.

Partial credit—or discredit—undoubtedly goes to Airbus, which later informed Li Jiaxiang, chairperson of the Civil Aviation Administration of China, of its role behind the scenes. As the world’s fastest growing aviation market where the French manufacturer could claim a 47 percent share, China delaying its purchases undoubtedly hit a blind spot. In its relentless crusade, Airbus was trying to salvage the 55 aircrafts Beijing put on hold, equivalent to about 10 percent of the total aircrafts ever delivered to China by the company.

In this instance, the European Union arguably caved in, and its attempt at promoting its green principles ultimately boiled down to a battle between economic versus environmental interests. A number of countries, including China, have expressed dissatisfaction with CBAM and are concerned with increased costs their businesses could face, exactly like in 2012. The issue has not become as politicized yet, but the European Commission seems well aware it will face an uphill battle to push ahead its vision for a low-carbon transition.

With lobbying from China and possibly other countries, CBAM represents a test for the EU’s ability to stand its ground and spur global efforts in a world where bargaining behaviors have not historically tilted toward greener options.

Ludovica Meacci is a freelance China researcher, focused on European Union-China relations. She holds a Master of Science from SOAS University of London and was a 2017 Yenching scholar at Peking University.

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