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Kerry: Paris accord “precludes” EU carbon border tariff
France's support for a carbon-linked tariff was not met with enthusiasm by US Special Presidential Envoy for Climate John Kerry at a press conference in Paris on 10 March, and neither did he directly address its call for a shared Green Taxonomy.
Kerry told French finance minister Bruno Le Maire he hoped carbon-linked tariffs on EU imports, such as American goods, would not be necessary thanks to a US-hosted virtual climate summit set for 22 April.
President Joe Biden is expected to use the summit to announce a tightening of America's Paris Agreement target and push others to do the same, having recently returned the second highest-emitting nation to the treaty after departing in November.
The EU aims to protect its companies while still aligning with the bloc's Paris Agreement target. It is working to legislate a charge on imports known as the carbon border adjustment mechanism (CBAM) in the second quarter of 2021.
Kerry said carbon-linked tariffs were attempts to assign costs to greenhouse gas (GHG) emissions. "Whether or not we think this is the right tool, we have not yet been able to sit down and evaluate that," said Kerry. "On the other hand, what I hope can happen is that we can come together ahead of Glasgow, ahead of it, to be able to preclude the need for countries to feel they have to implement something because we're not getting enough done."
Kerry said while France was hard at work on ensuring the passage of the CBAM, "I think our hope would be that everybody would be seized by the issue sufficiently so that we're all putting on the table the steps that are necessary, so it wouldn't require individual regions or nations to take action, but I fully understand why people are looking at it in order to try to measure that against the urgency."
The French central bank already campaigns for green finance, in particular the EU's planned revision of the 2014 Non-Financial Reporting Directive. The linked Green Taxonomy regulation, which increases disclosure obligations for financial market participants, is set to enter into force in December this year.
Prior to the press conference, Kerry and Le Maire agreed to work together on France's main proposal: the launch of a joint US-EU Green Taxonomy for public and private financial institutions. However, Kerry steered clear of making any promises on taxonomy. He said the US and France would have further talks on a shared financial mechanism and that the private sector must do its part.
The collaboration follows overtures made by US financial industry regulators, such as the acting director of the Securities and Exchange Commission, Allison Herren Lee, who said during the recent CERAWeek by IHS Markit conference that the SEC should work cooperatively with its partners at home and abroad.
Le Maire suggested joined-up policy for the US and EU on the "key question" of green finance. "It would be too bad at the end of the day if we have two rules and two taxonomies, one for the US and one for Europe," he said. "It would be a source of considerable confusion between the two continents. We therefore favor harmonization of the taxonomies on green finance so the rules are the same on both sides of the Atlantic and more effective. We have decided to work together on this subject."
It was good news for coming generations that the EU and the US were working together in fighting carbon dioxide emissions, he said. "Growth must be green growth, as [President Emmanuel Macron] has told us many times and committed himself strongly in this direction over the past three years. We cannot continue, no less after the crisis we have just known, to develop the economy to the detriment of the planet," said Le Maire.
"I tell you this: finance is the heart of the climate war," he added.
The French finance minister implied a taxonomy would strengthen transparency in the fight against investments that fuel global warming. "We must also have the assurance that this green finance is not 'greenwashing' and that these investments will really make renewables, clean energy, and durable projects. I have therefore proposed to John Kerry an identical taxonomy between the US and Europe," said Le Maire.
Europe is at an advanced stage with its own legislation, he noted, referring to the EU's Green Taxonomy, which has been under development since 2018.
The climate risks of investment in high-carbon industries, especially by states trying to boost post-pandemic economic recovery, were the focus of a recent United Nations Environment Programme report.
French nuclear, hydrogen to soar
In commenting on how to reduce emissions, particularly from the energy sector, Le Maire said that the US, like France supported climate-friendly nuclear power.
Nuclear power made up 70.1% of France's energy mix in 2019, IHS Markit senior research analysts Anna Mosby and Sara Giordano wrote in a climate profile of the country.
While nuclear power does not produce carbon dioxide emissions, France will still make decarbonization efforts, with goals for 2030 of cutting GHG emissions by 40% from 1990 levels and obtaining 33% of final energy consumption from renewables.
For France, cheap hydrogen could be key to decarbonizing the energy system, according to Le Maire. France is working with Germany and other European countries on a Project of Common European Interest to produce green hydrogen for trains, buses, and trucks worth €16 billion.
He joked the US and the EU should have a contest to see which one is the first to have a hydrogen-fueled airplane, and hoped French manufacturer Airbus would produce one by 2035, beating the American manufacturer Boeing to the punch.
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