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Last Updated: Tuesday, 22 January 2008, 09:30 GMT
Barroso trade threat on climate
By Roger Harrabin
Environment analyst, BBC News

European Commission President Jose Manuel Barroso
Mr Barroso says his preferred option is a global emissions treaty
The president of the European Commmission has threatened to impose carbon tariffs on imports unless the US agrees to a global climate change deal.

Jose Manuel Barroso wants to protect energy-intensive sectors such as aluminium, steel and cement.

He says there is no point these industries cutting emissions in Europe if they lose business to countries with more lax rules on carbon emissions.

Mr Barroso made the comments in a speech to business leaders in London.

Level playing field

He said foreign firms should be forced to purchase the same EU carbon allowances European firms would have to buy, thereby levelling the industrial playing field.

I think we should be ready to continue to give the energy-intensive industries their (carbon) allowances free of charge - or to require importers to obtain allowances alongside European competitors
Jose Manuel Barroso
European Commission President
The threat of trade measures is the nuclear bomb of climate negotiations - and the commission president said he very much hoped it would not be used.

He said his preferred option was for a comprehensive global treaty on emissions.

His fall-back was a global sectoral agreement imposing uniform standards on energy-intensive export industries.

If these failed, he would either protect Europe's industries by giving them all their carbon allowances in the European Trading System (ETS) free of charge, or charge importers at the same rate for the allowances.

"I think we should be ready to continue to give the energy-intensive industries their ETS allowances free of charge - or to require importers to obtain allowances alongside European competitors, as long as this system is compatible with WTO (World Trade Organization) requirements."

French idea

The idea of climate trade sanctions against nations such as the United States has long been promoted by the French.

They say it is unfair for Europe's firms to bear a financial risk because of the EU's leadership on a global issue.

They believe the right measures would be acceptable to the WTO, which in some cases allows countries to impose charges on environmental grounds.

But US trade representative Susan Schwab said on Monday that climate change should not be used as an excuse for protectionism. And EU Trade Commissioner Peter Mandelson agreed that restrictions were not "the way forward".

He has been overruled by Mr Barroso, who will be aware of the effects of his words not just in Washington but also in Beijing and Delhi.

But Britain's Energy Minister Malcolm Wicks said the Commission's proposals "might look like trade barriers".

"We believe in global trade, we want more of it in the future, not less, and that is good for the European economy," he told BBC News.

"There is always the danger that the protectionists in Europe... could use this as a secret weapon... to bring about protectionism."

Investing audience

Mr Barroso's speech on Monday evening at Lehman Brothers Bank in Canary Wharf was quite warmly received by an audience mainly of investors.

John Llewellyn of Lehman Brothers said Mr Barroso was right to make the threat of trade sanctions, and right to insist that they would be very much the last resort.

He said: "I have heard quite prominent Americans say they would recommend to the Europeans that they did it (impose trade measures). But it's not the way to go if you can possibly avoid it."

Tom Burke of environment consultancy E3G said the soft threat would focus minds among other major polluters in future climate negotiations.

"What was really important in the way Barroso raised the issue of compensatory adjustments is that it sends a very strong signal about how serious Europe is about this," he said.

"People need to understand that Europe sees climate change as in its national interest. And Europe's going to fight pretty aggressively to protect the interest of 450 million Europeans."

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