What Did Carney Mean by ‘Carbon Is Trade’?

Prime Minister Mark Carney and leaders of the European Union share a similar vision that climate change policies should be integrated in trade between countries.

“The future of trade does take carbon into account,” Carney said during a press conference after the June 23 Canada-EU Summit in Brussels, adding that “carbon is trade.”

Carney’s comment came in response to a reporter’s question about a draft agreement of a trade deal between the United States and the EU, which was being circulated by the U.S. Trade Representative’s Office.

The Wall Street Journal reported on June 20 that the draft agreement addresses the EU’s plan to implement a carbon border adjustment mechanism. It says the United States and the EU would coordinate on the design and implementation of the mechanism, and that U.S. products would be exempted for a year after it comes into force.

The carbon border adjustment mechanism is a tariff on imported foreign goods based on the amount of greenhouse gas emissions produced during their manufacturing. This policy from the EU is expected to be implemented in 2026 and will initially apply to goods said to be at a high risk of “carbon leakage,” such as steel, cement, and fertilizers. The term carbon leakage refers to when, for instance, a company shifts production of goods with greenhouse gas emissions to another jurisdiction that has more relaxed emission regulations, thus lowering emissions in the original jurisdiction but increasing the emissions in the new one.

President of the European Commission Ursula von der Leyen did not confirm the media report and said she wouldn’t go into details about the trade negotiations with the United States.

“Negotiations are only closed at the moment. Everything is negotiated,” she said during the press conference alongside Carney.

“Of course we discuss tariff lines, we discuss non-tariff barriers like standards and norms for example, we discuss strategic purchases, we discuss all these topics,” she said. “But where it is the sovereign decision-making process in the European Union and its member states that is affected, this is too far.”

Before becoming prime minister, Carney had been an advocate of climate change policies such as carbon pricing and served as the U.N. special envoy on climate action and finance. He nonetheless eliminated the consumer carbon tax immediately after assuming power in March, saying the tax had become too “divisive” after Conservatives campaigned for years on its removal.

Carney has kept the industrial carbon price in place, and the Liberal Party’s election platform says that “big industrial polluters” should instead “bear the cost of achieving our climate targets.”

While this topic received more attention during the campaign, Carney has also pledged to adopt a carbon border adjustment mechanism like the EU.

This was not a major talking point during the election campaign, but it appears in the Liberal platform.

The purpose of the mechanism is to help protect Canadian industries that are being domestically penalized by carbon pricing. By raising the price on imported goods high in carbon, it helps keep local companies remain competitive.

The mechanism “can help ensure that imported goods face the same carbon costs as domestically produced goods,” the Department of Finance says in a document exploring the policy.

The Liberal platform says “companies that take their climate responsibilities seriously should be treated fairly. So we will work with reliable partners to ensure fairness for Canadian industries and better economically integrate Canada with allies in the fight against climate change.”

The Liberal government has not indicated when it intends to propose its carbon border mechanism.

But before the April 28 election, as Carney was on his first visit to Europe as prime minister in late March, he also said his government’s industrial carbon pricing policy and other emissions policies will be important in finding new trading opportunities in the face of U.S. tariffs.

“Guess what one of the requirements is to diversify trade to the European Union?” he said in London, England, on March 17, while saying that carbon pricing will also be necessary for trade with the UK. He added that it would become a necessity for trading with “emerging Asia” as well.

“Europe has an enormous opportunity to leapfrog over American companies where they’re trying to turn back the clock and look inwards. We’re going to take that opportunity,” Carney said.

Recent Focus

Amid the trade conflict with the United States, which entails different sets of tariffs and retaliatory measures, Liberals have focused on passing tax relief measures in the House of Commons, along with Bill C-5 to remove federal barriers to interprovincial trade and speed up approval of major projects. Bill C-5 cleared the House of Commons on June 20 and is expected to be studied in the Senate the following week.

Meanwhile, negotiations between Canada and the United States on a trade deal have been ongoing, but details have been kept under wraps. Carney and U.S. President Donald Trump have been in direct contact regularly and agreed at the G7 summit to aim to reach a deal within 30 days.

A deal between Canada and the EU was signed during Carney’s visit, which will allow talks to begin for Canada to join Europe’s rearmament plan. Canada and the EU also agreed to deepen their strategic partnership.

Carney has looked toward Europe to bolster relationships, where it appears he is finding more like-minded partners. The joint statement issued after the summit says climate change is an “existential threat” that must be tackled with “ambitious” action.

“Carbon pricing, carbon removal and industrial decarbonization are key to reaching net-zero and decarbonization goals, while a high integrity carbon market can contribute to enhancing the global ambition,” it reads.

Noé Chartier is a senior reporter with the Canadian edition of The Epoch Times. Twitter: @NChartierET

Source