News & Events
October 20th, 2010

Source: EU Observer | Date: 21 AUG 2010 | Author: Christofer Fjellner & Johnny Munkhammar

The interest in and the development of environmentally friendly products has grown rapidly over the last years. This is good news. But there is a growing threat that the strive for CO2 reduction is resulting in what we can call "green protectionism".

This protectionism will harm world trade, the very foundation for global economic development. ach litre of ethanol consumed in Europe is subsidised by about €0,75 of tax money.

Last year the EU institutions adopted a directive on the promotion of the use of renewable energy, and the individual EU member states have currently notified the Commission of their national action plans for implementing it. The risk is that the directive might create a loophole for special interests with aims other than improving the environment and renewable energy production.

European domestic production of biofuels is already subsidised and protected by tariff walls. Each litre of ethanol consumed in Europe is subsidised by about €0.75 of our tax money. Each litre of biodiesel is subsidised by about €0.50. The production of ethanol is protected by tariffs of between 39 and 63 percent.

Now that the EU directive on renewable energy must be implemented in national legislation by the end of this year, the protectionism that already characterises biofuels in Europe is getting further momentum through putting up barriers against imported biofuels, such as ethanol from Brazil. This kind of policy is completely contra productive. Evidently, like all other products, biofuels should be produced and exported by those countries that have the best conditions to do so, and studies have shown that it is not possible to meet the EU's biofuels needs with domestic raw material production.

To restrict trade through high tariffs or domestic subsidies is not only incompatible with WTO rules, but would in this case also result in higher prices for consumers and higher costs for society as a whole. It is not economically sustainable to artificially encourage the production of biofuels through the aid of tariffs and subsidies. These protectionist measures also create a situation where those countries who are better suited to produce biofuels are prevented from competing with European producers and, thus, achieving economic development in their countries.

Trade conflicts where tariffs escalate in a vicious circle are destructive for global economic development. In this case, such a situation would also severely damage the environment since it is well established by the UN climate change panel that maximum global growth will result in faster reduction of emissions. So let's fight green protectionism and let the market be the driving force in combating climate change.

Christofer Fjellner is Member of the European Parliament's committees for International Trade and Environment, public health and food safety, and Johnny Munkhammar is Research Director, European Enterprise Institute.