Aurelia Butler

After a year of intense talks, and a series of marathon negotiations in the lead-up to Christmas, the EU late last year agreed on a carbon border tax — the first of its kind globally. It could be vital for the bloc’s net zero ambitions. If it galvanises other trading partners into pricing their carbon emissions, it could also be a pioneering stride forward in the global fight against climate change. While the levy makes sense in theory, its success will depend on how effectively the EU can navigate the numerous practical challenges of actually implementing it.The carbon border adjustment mechanism (CBAM) requires firms in the bloc to pay tariffs on some carbon-intensive imports linked to the domestic carbon price under its Emissions Trading System (ETS). As such, it aims to level the playing field for European industries that already pay for their emissions via the ETS, and prevent dirty production from shifting to where it is less heavily taxed — also known as “carbon leakage”. While it raises trading costs, the lure of retaining access to the world’s largest trading bloc could support the wider adoption of carbon prices — which is vital for cutting global emissions. Indeed, the more countries adopt carbon pricing, the less carbon-related tariffs would actually be applied.By moving first the EU hopes to sustain support for the green transition at home. Europe’s competitiveness has been strained over the past year. High energy costs, supply chain disruption, and the potential impact of the US Inflation Reduction Act have raised fears of industrial decline. Decarbonisation is not cheap: while CBAM would put the bloc’s businesses on a fairer footing, the EU will need to grapple with demands for more support. Free emission allowances are being phased out, albeit slowly, as the CBAM comes in. Meanwhile, some businesses and officials are calling for export rebates, which analysts say may contravene WTO rules.Keeping international partners on side, and not intensifying existing trade tensions will be hard. While some nations are mulling similar schemes, the CBAM has already faced accusations of creating protectionist trade barriers. The US and China have expressed concerns. Countries are worried their manufacturers may face a wave of cheap imports diverted from the EU, alongside weaker access to the bloc. Developing nations, which are less able to cushion regulatory costs and measure emissions, may also suffer without concessions. This risks spurring WTO challenges, retaliation, and a hodgepodge of carbon border taxes with varying rules.Over time the CBAM could also lead to unintended consequences. Given its initial scope — covering a few imports including iron, steel, fertiliser, and electricity — EU businesses could adjust their supply chains to avoid the tax, for example by importing finished products instead. Companies outside could also simply send their cleanest products to the bloc and carbon-intensive ones elsewhere without slashing emissions. Indeed, the scope of CBAM may need widening to make it more effective, but this would also intensify the domestic and international challenges. The CBAM is a key instrument in the EU’s climate toolkit. Ideally, it would catalyse a broader international discussion on how trade can be used as a tool to help meet global goals on climate change. To make carbon border taxes work — and ultimately redundant — there needs to be transparency and common standards on how carbon content is measured and priced. German chancellor Olaf Scholz’s push for a G7 “climate club” offers hope that nations can band together. The EU must redouble efforts on such initiatives with international partners, otherwise global carbon pricing will remain a pipe dream. More

BRASILIA (Reuters) – Brazil’s 11-day-old government braced on Wednesday for more anti-democratic protests by far-right former President Jair Bolsonaro’s supporters whose rampage through government threatened the country’s political stability.The government of leftist President Luiz Inacio Lula da Silva bolstered security measures nationwide as flyers appeared on pro-Bolsonaro social media calling for mass demonstrations in Brazilian cities to “retake power.””We have measures for this Wednesday to reinforce security throughout the country since pamphlets of new demonstrations have been circulated,” Lula’s chief of staff Rui Costa said late on Tuesday after a cabinet meeting.Faced with the threat of new protests, the government’s Solicitor General asked the Supreme Court to prohibit road blocks across Brazil and the invasion of public buildings.His office also asked for a temporary ban on demonstrations and fines for companies found to be financing the logistics of the anti-democratic protests.Authorities have sought to block Bolsonaro’s assets and arrest warrants were issued on Tuesday for officials responsible for public security in Brasilia for allowing an insurrection.On Sunday, thousands of Bolsonaro supporters stormed the seats of power in Brasilia and ransacked the Supreme Court, Congress and presidential offices in the worst assault on democracy since military dictatorship ended in 1985.Bolsonaro, who left Brazil 48 hours before his term ended and has yet to concede defeat by Lula in the October elections, said on social media from Florida he planned to return to Brazil earlier than planned for medical reasons.Supreme Court Justice Alexandre de Moraes issued an arrest warrant on Tuesday for Bolsonaro’s former justice minister, Anderson Torres, who became Brasilia’s public security chief after Lula took office on Jan. 1.Torres was fired for his failure to stop Sunday’s protests and the arrest warrant cited connivance with the demonstrators, who marched to the center of the capital unimpeded and, in fact, escorted by police cars.Torres was not in the city during the riots, having flown to Florida earlier this month. He said on Twitter on Tuesday that he would return to Brazil from Orlando, where he was vacationing with his family, and turn himself in to justice.Justice Moraes also requested the arrest of Fabio Augusto Vieira, the head of Brasilia’s military police, one of a number of officials responsible for protecting the key Brasilia government buildings. On Tuesday, prosecutors at the federal audits court, called TCU, asked the court to block the assets of Bolsonaro and Torres, as well as those of former Brasilia governor Ibaneis Rocha, who was removed by Justice Moraes for failing to stop Sunday’s rampage in the capital.Authorities restored order in Brasilia on Monday and soldiers dismantled a camp outside army headquarters where Bolsonaro supporters had called for a military coup since Lula won the elections in October. More than 1,000 people were arrested and were being questioned by police. More

ISLAMABAD (Reuters) – Pakistan will take fiscal measures set by the International Monetary Fund (IMF) to meet its budgetary targets for the 2022-23 financial year, finance minister Ishaq Dar said on Wednesday.The measures included reviewing subsidies in the farming and export sectors and shedding energy sector debt, he said.The minister told a news conference in Islamabad that a “detailed discussion” had taken place with the IMF on the sidelines of a climate conference in Geneva on Monday, where the lender had emphasized a need to take the fiscal measures.A 9th IMF review to clear the release of the next tranche of funds to Pakistan has been pending since September, as the country faces a severe economic crisis with its central bank foreign reserves falling to a critical level of below $5 billion, which is barely enough for three months of imports.Pakistan does not have any plans to take over commercial bank’s foreign reserves, Dar said in a statement after the news conference, hoping the central bank reserves would improve soon. “They (IMF) think that we should take some fiscal measures, like if there are some un-budgeted subsidies,” he said, adding the latest discussion had narrowed down the issues on the IMF’s agenda.”We will achieve all our budgetary targets,” he said.Dar said that the IMF had taken up the subsidies in the export and farming sectors and the energy reforms, adding: “We will do it but it wouldn’t burden any common man, it will be very targeted and categorical.” The minister did not elaborate on whether the subsidies would be cut or withdrawn altogether, saying it would be worked out, adding that the gas sector debt would be reduced from dividends of the companies. Pakistan’s power regulator has already allowed Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company (SSGC) to hike rates up to 75%, which is subject to cabinet approval.The IMF approved the seventh and eighth reviews of Pakistan’s bailout programme, agreed in 2019, together in August to allow the release of more than $1.1 billion.Pakistan secured a $6 billion bailout in 2019, that was topped up with another $1 billion earlier this year. With its dwindling reserves, the IMF programme is critical for Pakistan, which urgently need external financing to support an economy that was badly battered by devastating floods in the last monsoon season.More than $9 billion in pledges were made by the international community for the flood recovery at a climate conference in Geneva on Monday.Longtime ally Saudi Arabia also said on Tuesday it was considering investing $10 billion in the South Asian nation of 220 million and increasing its deposits in the country’s central bank from $3 billion to $5 billion. (Additional Reporting by Gibran Peshimam; Writing by Sakshi Dayal and Asif Shahzad; Editing by Frank Jack Daniel, Tomasz Janowski and Alex Richardson) More