Carbon Tax: Protectionism or a Cleaner World?

In April, the EU approved the world's first plan targeting steel, cement, aluminum, fertilizers, electricity, and hydrogen imports, introducing taxes on high-carbon imports starting from 2026.

On December 18, the UK government announced that it would impose a new carbon import tax on certain products starting from 2027 to help protect businesses against cheap imports from countries with less stringent climate policies.

In September, the European Union launched the first phase of a system applying CO2 emission tariffs to imported steel, cement, and other goods. The Union will not start collecting any CO2 emission fees at the border until 2026. The new regime, which entered a trial phase in October, requires those importing goods into the EU to report only the carbon emissions of these products. Starting in 2026, a fee/tax will be imposed.

What is a Carbon Tax?

The carbon footprint expresses the total amount of carbon dioxide and other greenhouse gas emissions caused directly or indirectly by a product or activity throughout the production and consumption activities of an individual or organization, expressed in units.

Based on this definition, companies will have to calculate, document, and pay taxes on the carbon they emit as a result of their activities.

Is the World Not Getting Polluted?

There is a fact at hand: despite the conspiracy theories surrounding "global warming" for some, visible changes on Earth do not support these theories. Considering the introduction of capitalist production and consumption to the world, coupled with the increasing population, even a blind person can perceive the pollution that has emerged.

Especially the reckless and ruthless industrialization that began in the UK, later shifting extreme pollution away from its borders to China and the East to exploit labor, essentially reflects the concrete situation of the issue. You can witness this in Turkey as well. Isn't the death of the once heavenly Sea of Marmara entirely the result of this reckless industrialization?

However, this is not the only side of the coin!

On the other hand, it would not be considered playing the devil's advocate to think that Europe is also using this as a weapon to recover the lost competitiveness of its industry and protect itself against cheap imports from countries with less stringent climate policies such as China and the East.

The high standards in the European Union in terms of standards, as well as the high prices of raw materials and labor, the desire not to keep its environmental impact within the continent of Europe, and the goal of increasing prosperity and keeping inflation low through cheaply acquired products have led to the relocation of production to different geographies and the import of products produced at lower costs. Putting an end to this trend certainly requires strategic steps.

The whole picture indicates that countries, especially the EU and the UK, are taking steps to protect and perhaps enhance their own industries. Indeed, with China's dominance in electric vehicles being undisputed, the high carbon footprint of battery and steel production may be a good reason to stop the Chinese invasion. Killing two birds with one stone...

Wood Mackenzie, a consulting firm, stated in September that the relevant process could significantly increase the costs of steel imports from India and China.

In addition to China, following the European Union's announcement of its plan to file a complaint with the World Trade Organization regarding the carbon tax it applies to imports in May, India is considering local tax options to avoid the EU carbon tax.

The definite result of all this is that if other countries take reciprocal and similar trade protection measures to protect their interests, this situation may lead to higher trade costs and increased risks of trade friction. It seems that the waters will not calm down worldwide...