The European Union (EU) has moved to impose carbon tax in several sectors as part of a long-term initiative, known as the EU’s Green Deal. The Green Deal lays out a blueprint for climate impartiality aiming to transform Europe into a carbon neutral continent.
Garments and leather items, the main export products of Bangladesh, are not included in the initial list. There are a number of products under these sectors which Bangladesh does not export much to the European market. As a result, if the current policy continues in the future, it will not create major concerns for Bangladesh with regard to the green deal.
However, according to the initial assessment of Research and Policy Integration for Development (RAPID), apparel, leather and footwear are among the 63 sub sectors deemed at risk for carbon leakage.
The EU might include these items to the list in future. In that case, international trade experts and environmental economists fear that these Bangladeshi products could face increased competition, which could hurt exports.
They say that this green deal can change the trading environment of not only Bangladesh but the whole world. Industry experts advised that Bangladesh must immediately begin to study the issue in detail and prepare in light of the standards of buyer countries. Otherwise, it may lag behind its competitors in export trade.
However, M A Razzaque said that Europe’s carbon tax policy does not allow double taxation. So, if Bangladesh is already preparing to impose a carbon tax, then there will be no need to pay for the export of goods to EU countries.
“Another option is to focus on renewable energy. Our industrialists and policymakers need to be aware in this regard,” he added.
China has already launched a carbon market, and Vietnam is in the process of doing the same. There is no carbon tax or carbon market in Bangladesh yet. However, a few years ago a surcharge of 1% was imposed on the polluting industries. China has already imposed carbon tax as part of its efforts to reduce carbon emissions and avoid possible carbon taxes in the European markets. Several competitor countries of Bangladesh including Vietnam and India have already taken this initiative.
The European Green Deal is a new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases by 2050.
According to the EU’s Green Deal, every sector that uses carbon-emission intensive fuel must pay the fee. Under the EU carbon border adjustment mechanism (CBAM), iron and steel, cement, fertilizer, aluminum and electricity generation sectors are already subject to carbon taxation.
Starting in 2026, carbon tax will be levied on imports from foreign companies by EU listed buyers. This means importers will pay for embedded emission and buy CBAM certificates from the said time. If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted. A carbon price of $28 per ton of CO2 on imports is equal to a 2% import tariff.
