We may quarrel over the details, but the return to the Vital Centre of European political life is essential. Reason, facts, balance, and good sense I now needed more than ever. Let's keep thinking it's an old European tradition in need of reviving. It's called enlightenment.
Luis, on the issue of CBAM, I believe there are two significant flaws or drawbacks to this policy that receive little attention, and I’d like to hear your thoughts on them.
CBAM aims to create a level playing field for ETS-regulated products within the EU internal market, with the main goal of preventing carbon leakage and the relocation of ETS-affected industries abroad. On the surface, this seems effective. However, while balancing the directly impacted market internally, the measure inadvertently undermines the competitiveness of EU-regulated products abroad, as well as downstream products that use these goods as raw materials both within and outside the EU.
1. Impact on ETS-affected products like steel: These products, which pay the carbon price, become less competitive abroad compared to global peers that do not bear the same carbon costs when selling their products outside the EU. To achieve a truly global level playing field, the same way products entering the EU market are charged a carbon premium, "green" products that leave the EU should be incentivized to compete equally with "dirty" products. However, WTO rules prevent export subsidies, making this complex.
2. Impact on downstream products: Products that contain a high quantity of upstream regulated goods (like steel in cars) become less competitive both internally and abroad. For example, EU car manufacturers must use CBAM-compliant steel, which carries a carbon premium that increases the cost of the final product. This puts EU manufacturers at a disadvantage when competing against Chinese car exports in the EU. Chinese cars, although made from high quantities of CBAM-regulated materials, are not subject to CBAM, and thus do not carry the embedded carbon costs that European cars do. In essence, while leakage in the upstream markets (less value-added) is mitigated, it harms the competitiveness of downstream products (more innovative and higher value-added). A potential solution could be to extend CBAM to all products containing significant quantities of materials subject to CBAM.
We're coming out of an ice age, Luis. If we don't screw things up by messing with the weather, we could green the whole planet by helping the natural warming process along. You've got the situation backward.
Garicano, the cost-benefit analysis of these issues is very tricky. It takes into account "Business as Usual" but not the fact that the transition protects you from energy shocks and as you well know, the cost of these has been incredibly high throughout history (not going back too far, but the recent war in Ukraine).
I really appreciate yourdiscussion of European economic policy. It is always very factual and specific and never generalmor vague.
We may quarrel over the details, but the return to the Vital Centre of European political life is essential. Reason, facts, balance, and good sense I now needed more than ever. Let's keep thinking it's an old European tradition in need of reviving. It's called enlightenment.
Luis, on the issue of CBAM, I believe there are two significant flaws or drawbacks to this policy that receive little attention, and I’d like to hear your thoughts on them.
CBAM aims to create a level playing field for ETS-regulated products within the EU internal market, with the main goal of preventing carbon leakage and the relocation of ETS-affected industries abroad. On the surface, this seems effective. However, while balancing the directly impacted market internally, the measure inadvertently undermines the competitiveness of EU-regulated products abroad, as well as downstream products that use these goods as raw materials both within and outside the EU.
1. Impact on ETS-affected products like steel: These products, which pay the carbon price, become less competitive abroad compared to global peers that do not bear the same carbon costs when selling their products outside the EU. To achieve a truly global level playing field, the same way products entering the EU market are charged a carbon premium, "green" products that leave the EU should be incentivized to compete equally with "dirty" products. However, WTO rules prevent export subsidies, making this complex.
2. Impact on downstream products: Products that contain a high quantity of upstream regulated goods (like steel in cars) become less competitive both internally and abroad. For example, EU car manufacturers must use CBAM-compliant steel, which carries a carbon premium that increases the cost of the final product. This puts EU manufacturers at a disadvantage when competing against Chinese car exports in the EU. Chinese cars, although made from high quantities of CBAM-regulated materials, are not subject to CBAM, and thus do not carry the embedded carbon costs that European cars do. In essence, while leakage in the upstream markets (less value-added) is mitigated, it harms the competitiveness of downstream products (more innovative and higher value-added). A potential solution could be to extend CBAM to all products containing significant quantities of materials subject to CBAM.
We're coming out of an ice age, Luis. If we don't screw things up by messing with the weather, we could green the whole planet by helping the natural warming process along. You've got the situation backward.
So we agree that we should stop messing with the weather, meaning we should stop emiting all those gases into the athmosphere? :)
Garicano, the cost-benefit analysis of these issues is very tricky. It takes into account "Business as Usual" but not the fact that the transition protects you from energy shocks and as you well know, the cost of these has been incredibly high throughout history (not going back too far, but the recent war in Ukraine).