European Parliament Rejects Request to Abolish Free Carbon Emission Allowance Allocation... "Concerns Over Corporate Relocation Abroad"

Rejection in the Adoption Process of the Environment Committee Report Amendment
Carbon Border Tax Implementation Plan Remains Unchanged from 2023

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] It has been reported that the European Parliament rejected the proposal by the Environment Committee to abolish the free allocation system of carbon emission allowances. This is interpreted as due to concerns that so-called 'carbon leakage,' such as large-scale relocation of foreign companies, could occur amid worsening economic difficulties caused by the COVID-19 pandemic. The 2023 carbon border tax implementation plan was passed without changes.

According to AP News and major foreign media, on the 9th (local time), the European Parliament adopted a revised report on the carbon border tax submitted by the European Parliament Environment Committee, rejecting the proposal to abolish the free allocation system of carbon emission allowances requested through the revision. It is known that the plan to implement the carbon border tax by 2023 was passed as is.

The free allocation system designates industries that do not need to purchase greenhouse gas emission allowances and grants allowances free of charge. Currently, the European Union (EU) applies the free allocation system to 175 industries, including the aviation sector. According to major foreign media, members of the European Parliament are reportedly concerned that abolishing the free allocation system could lead many companies to evade emission regulations by relocating overseas, resulting in side effects such as economic recession and job cuts.

While the Environment Committee and environmental organizations leading environmental policies within Europe argue that the free allocation system must be proactively abolished to establish the carbon border tax and enforce it on other countries, it is interpreted that the economic difficulties of each country have intensified due to the COVID-19 pandemic, strengthening the protectionist sentiment for domestic industries within the region.

Meanwhile, the EU previously set a goal to achieve so-called carbon neutrality by 2050, reducing net carbon emissions to '0,' and is currently preparing and promoting the 'Green Deal' legislation, which contains a blueprint for climate change and environmental fields. The carbon border tax, a core element of this Green Deal, refers to a tariff barrier imposed when countries with lax carbon dioxide emission regulations export goods and services to the EU.

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