If New Zealand falls behind international efforts to cut carbon, milk, meat, and metal exports could one day be stung with border tariffs.
Lawmakers in the European Union and the US have announced proposals to put levies on foreign goods that aren’t subject to carbon pricing in their home countries. The EU tariffs will begin with industrial products, such as aluminium.
The goal of the tariffs is to level the playing field, so EU and US-based businesses don’t lose out to countries with softer emissions rules. Experts are divided on whether these could one day extend to our biggest exports, dairy and meat.
If covered by the Emissions Trading Scheme, or a proposed scheme to price farming’s greenhouse gases that could kick in from 2025, New Zealand exports might escape levies, but only if those schemes are deemed tough enough by overseas lawmakers.
Among the initiatives to meet its goal to reduce its total carbon footprint by 55 percent by 2030 and to net-zero by 2050, the EU has tinkered with the idea of a ‘carbon border adjustment mechanism’ since 2019 and has now announced a formal proposal.
The rules are yet to be determined, but the tariff is likely to mirror the carbon price paid by EU businesses. The EU wants to begin with industrial emissions, aiming the tariff at aluminium, cement, chemicals, iron, refined oil, and steel – plus imported electricity.
In the US, Democrat lawmakers have proposed a carbon border tax as part of budget discussions. Iron and steel are likely targets, although the US concept is at a much earlier stage.
The US and EU are New Zealand’s third and fourth-largest export markets, respectively. In 2019, each purchased nearly 11 percent of the country’s exported goods and services (because this was pre-Brexit, the EU’s numbers include the UK). Climate clauses could also be part of the free trade deal that is currently being negotiated by the New Zealand Government and the UK.
Carbon border tariffs target countries that have laxer rules. Countries with similar or more robust emissions-cutting schemes should escape penalty.
Climate campaigner, Paul Winton noted that although the proposed tariff only applies to a select group of products, it’s “not rocket science to imagine” this could be extended to cover more of New Zealand’s exports.