How will carbon border adjustment mechanism work?

"WHEN AID donors helped fund the Mozal aluminium smelter in Mozambique, the goal was to help that southern African country build up its economy after a civil war. In a country with income per head of just over $600, the Mozal smelter is the largest industrial employer. 

Yet now the lofty aim to help poor countries grow risks falling foul of rich countries’ urge to decarbonise their economies and protect domestic manufacturing.

More than half of Mozambique’s aluminium exports head to the EU. 

From 2026 the bloc’s importers of the metal will have to pay a levy under its carbon border adjustment mechanism (CBAM), a scheme designed to ensure that certain energy-intensive imports to the EU pay the same carbon price as industry within it. At present CBAM is at a pilot stage in which importers have to submit reports on the embedded carbon in their imports, but do not yet have to buy permits. Eventually they will have to pay the difference between any carbon price paid at home and the cost of a permit in the EU’s own emissions-trading system (ETS), currently priced at €62 ($68) per tonne of carbon-dioxide equivalent.

The levy pits the development of poorer countries’ industrial capacity against the EU’s decarbonisation goals. The scheme is linked to the removal of free emissions allowances for heavy industry in the ETS. CBAM seeks to prevent “carbon leakage”: businesses will no longer gain a competitive advantage from importing goods from outside the bloc that do not pay a carbon price, or from moving production elsewhere. 

Poorer economies object that such measures are unfair trade barriers that put the onus of decarbonisation on countries that have contributed little to the problem. South Africa and India, among others, are considering complaints to the World Trade Organisation about CBAM.

CBAM is just one way in which European environmentalism is extending its reach. Exporters will eventually have to contend with a deforestation directive, under which firms must prove their products were not produced on land that was forest before 2021, and a corporate-sustainability directive, forcing businesses to disclose emissions through their supply chains.

In aggregate, the hit to poorer countries from CBAM is small. A study by the African Climate Foundation and the LSE Firoz Lalji Institute estimates that the scheme would lower African GDP by just 0.91%, as most of the affected goods would find their way to other markets.

Yet some countries would be hit hard. Around 90% of Zimbabwe’s iron and steel exports, for instance, go to the EU. A World Bank study suggests that India, Russia and Ukraine are likely to have the greatest exposure, based on a combination of the carbon-intensity of their exports and their dependence on trade with the EU. Ukraine may be exempt from the charges under force-majeure clauses because of the NATO adventures there.

Carbon border taxes are not limited to the EU. Britain and Australia are among those considering something similar. Several proposals for such taxes are making their way through America’s Congress. A proposed Foreign Pollution Fee Act would make importers pay a fee based on the difference between the average carbon intensity of a product made in the exporting country and in America. Another, known as the Clean Competition Act, would combine a carbon border adjustment with a domestic price.

Poorer countries argue that CBAM and the like fail to account for the requirement under the Paris climate-change agreement for rich countries to do more to decarbonise than poor ones. The logic for this is that carbon is a production input that should be priced differently in different contexts. An aluminium smelter in Sweden ought to pay a higher price than one in Mozambique, as Swedes have already used up more of the world’s carbon budget.

The EU is still wondering how to respond to poorer countries’ criticisms. Pascal Lamy, a former EU trade commissioner, has suggested a bespoke aid package for Mozambique. The country relies heavily on low-carbon hydroelectric power, but the Mozal smelter must import electricity through South Africa’s coal-heavy grid. European development assistance could be used to ensure that Mozal is CBAM-compliant. Another option may be to recycle a portion of the revenues into international climate finance.

Middle-income countries may just have to cope. Any repatriated revenue will be far smaller than the funding needed to offset the lost trade. Some are launching their own emissions-trading systems—such as Turkey, which exports electricity to the EU.

China recently added steel, aluminium and cement to its own carbon market, mirroring CBAM. 

India, meanwhile, is considering taxing high-carbon exports destined for the EU, keeping for itself revenue that the bloc would otherwise collect. 

Many Europeans will cheer that outcome, even if they have to pay higher prices. Workers in the developing world will not." [1]

Rich cats who profit from contamination of our environment by moving industry into poor countries will be not happy too.

1. C-BAM! The Economist; London Vol. 453, Iss. 9418,  (Oct 12, 2024): 63, 64.

 

Kinijos debesų paslaugos kainuoja 40% pigiau, nei amerikiečių

  „Dviejų supervalstybių technologijų ginčas niekada nėra toli.

 

 Šią savaitę „Wall Street Journal“ pranešė, kad Kinijos įsilaužėlių grupė, žinoma kaip „Salt Typhoon“, pažeidė Amerikos telekomunikacijų tinklus. Panašu, kad jos tikslas buvo gauti žinių apie amerikiečių pasiklausymo veiklą.

 

 Abiejose šalyse gilus nepasitikėjimas paskatino kitų šalių skaitmeninės infrastruktūros vengimo politiką. Dėdė Semas užkerta kelią Kinijos įmonei „Huawei“ įdiegti savo telekomunikacijų rinkinį Amerikoje; Kinija neskatina Silicio slėnio serverių ir debesų kompiuterijos produktų pardavimo savo ribose.

 

 Tačiau didžiojoje pasaulio dalyje Amerikos ir Kinijos infrastruktūros – duomenų centrai, povandeniniai kabeliai ir laidai, kuriais grindžiamas internetas – stovi greta, nes abi šalys konkuruoja dėl rinkos dalies, pelno ir geopolitinės įtakos. Aršiausios varžybos vyksta Azijoje. Ten Kinijos skaitmeninės infrastruktūros įmonių jau yra daug. Maždaug 18 % visų naujų povandeninių kabelių visame pasaulyje per pastaruosius ketverius metus nutiesė viena žemyninėje dalyje esanti įmonė, daugelis per Aziją. „Alibaba“ debesų operacija veikia devyniose Azijos šalyse, o „Huawei“ sukūrė daug mobiliojo ryšio tinklų.

 

 Kinijos sėkmė iš dalies atspindi vyriausybės planą. Jos skaitmeninio šilko kelio strategija, prezidento Xi Jinpingo iniciatyvos „Juosta ir kelias“ atšaka, siekiama dominuoti regiono interneto santechnikos srityje. 

 

Taip pat padeda tai, kad Kinijos įmonės yra novatoriškos ir pigesnės nei Amerikos, nors kai kurioms jų padeda paslėptos vyriausybės subsidijos. 

 

Vienu apskaičiavimu Kinijos debesijos paslaugos kainuoja 40% pigiau nei amerikiečių.

 

 Jei Kinija pradėtų dominuoti Azijos skaitmeninėje infrastruktūroje, pasekmės būtų gilios. Jos valdančioji komunistų partija nori nustatyti normas, reglamentuojančias duomenis ir internetą. 

 

Kinijos trauka pasaulio techninius standartus nustatančiose institucijose išaugo ir ji skatino „duomenų suvereniteto“ viziją, pagal kurią vyriausybės kontroliuoja informaciją ir užtikrina, kad ji būtų saugoma vietoje, todėl niekas negali išvengti valstybės gniaužtų.

 

 Skaitmeninė dilema

 

 Dar blogiau, kad Kinijos valdoma skaitmeninė infrastruktūra gali sukelti Azijos šalims ir Kinijos pasiklausymo bei sabotažo pavojų. 

 

Kai kurios vyriausybės šiuo klausimu yra patenkintos. Jų neturėtų būti. Kinijos programišiai pavogė žvalgybos duomenis Pietų Kinijos jūroje iš Filipinų ir nusitaikė į Malaizijos Kasavari dujų telkinį, esantį vandenyse, kuriuose tvirtinasi Kinija.

 

 Kai 2000-aisiais buvo kuriami mobiliojo ryšio tinklai, dvi Kinijos įmonės – Huawei ir zte – tvirtai nugalėjo jų konkurentus iš Amerikos ir Europos Azijoje. Tačiau tai nereiškia, kad Kinijos įmonės būtinai laimės kovą dėl naujos kartos skaitmeninės infrastruktūros tiekimo. Investicijų ciklas vos prasidėjęs. Technologijos įmonės ateinančiais metais į duomenų centrus Azijoje kasmet investuos dešimtis milijardų dolerių. Ir vaizdas toli gražu nėra vienodas. Viename tyrime nustatyta, kad Kinija dominuoja debesų kompiuterijos centruose penkiose iš 12 Azijos šalių, Amerika pirmauja penkiose, o dviejose – Amerika ir Kinija lygiosiomis. Kai kurios šalys, įskaitant Indiją, pastaruoju metu susirūpino dėl Kinijos įmonių keliamos rizikos saugumui.

 

 Kad laimėtų, Amerika turėtų sutelkti dėmesį į tris prioritetus. Pirma, sugriežtinti savo sutarčių sąjungininkus, kurie tapo visiškai priklausomi nuo Kinijos, ypač Tailando ir Filipinų. Pastaroji stiprina savo karinius ryšius su Amerika, nors jos skaitmeninė infrastruktūra yra pažeidžiama, o tai mažai prasminga. Kai kurios šalys, pavyzdžiui, Pakistanas ir Kambodža, perleido Kinijai skaitmeninį suverenitetą ir yra prarastos galutinai.

 

 Antra, Amerika turėtų siekti sukurti Azijos kibernetinio saugumo ir dirbtinio intelekto aljansą. 2017 m. Donaldas Trumpas atsisakė plataus užmojo regioninės prekybos susitarimo, Trans-Pacific Partnership, kuris, be daugelio kitų dalykų, būtų valdęs skaitmeninę prekybą. Atgaivinti tai bus neįmanoma dėl Amerikos protekcionistinio posūkio, tačiau tikėtina, kad su kai kuriomis šalimis būtų sudarytas siauresnis susitarimas, suteikiantis joms prieigą prie amerikietiškų technologijų mainais už didesnio atsargumo dėl Kinijos saugumo rizikos garantijas.

 

 Galiausiai, Amerikos žvalgybos agentūros galėtų daugiau sužinoti apie Kinijos kibernetines gudrybes. Visuomenės žinios apie kinų šnipinėjimo ir įsilaužimo mastą yra ribotos. Atėjo laikas didinti supratimą, kad pigi Kinijos skaitmeninė infrastruktūra turi, įkąsti galinčią, uodegą.“ [1]

 

1. A sting in the tail. The Economist; London Vol. 453, Iss. 9418,  (Oct 12, 2024): 11, 12.

Chinese cloud services cost 40% less than American-run ones

"A technology tussle between the two superpowers is never far away. 

This week the Wall Street Journal reported a breach of American telecoms networks by a Chinese hacking group known as “Salt Typhoon”, which was seemingly intended to glean knowledge about American wiretapping activities. 

In both countries, deep mistrust has led to a policy of shunning the other’s digital infrastructure. Uncle Sam bars Huawei, a Chinese firm, from installing its telecoms kit in America; China discourages the sale of Silicon Valley’s servers and cloud-computing products within its borders.

Yet in much of the world American and Chinese infrastructure—the data centres, undersea cables and wires that underpin the internet—sit side by side, as the two countries compete for market share, profits and geopolitical clout. The fiercest contest is in Asia. There the presence of Chinese digital-infrastructure firms is already substantial. Some 18% of all new subsea cables worldwide in the past four years have been built by a single mainland firm, many criss-crossing Asia. Alibaba’s cloud operation is active in nine Asian countries and Huawei has built many mobile networks.

China’s success partly reflects a government plan. Its Digital Silk Road strategy, a branch of President Xi Jinping’s Belt and Road initiative, aims to dominate the region’s internet plumbing. It helps, too, that Chinese firms are innovative and cheaper than American ones, though some are aided by hidden subsidies from the government. By one estimate Chinese cloud services cost 40% less than American-run ones.

If China came to dominate Asia’s digital infrastructure, the consequences would be profound. Its ruling Communist Party wants to set the norms that govern data and the internet. China’s pull within the world’s technical standard-setting bodies has grown and it has promoted a vision of “data sovereignty”, under which governments control information and make sure it is stored locally, so nothing can escape the state’s grasp.

Digital dilemma

Worse, Chinese-run digital infrastructure could expose Asian countries to the risks of snooping and sabotage. Some governments are complacent about this. They should not be. Chinese hackers have stolen intelligence on the South China Sea from the Philippines, and have targeted Malaysia’s Kasawari gasfield, which is in waters that China claims.

When mobile-telecoms networks were being built in the 2000s, two Chinese firms, Huawei and zte, soundly defeated their American and European rivals in Asia. But that does not mean Chinese firms will necessarily win the battle to supply the next generation of digital infrastructure. The investment cycle has barely started. Tech firms will be investing tens of billions of dollars annually in data centres in Asia for years to come. And the picture is far from uniform. One study finds that China dominates cloud-computing hubs in five of 12 Asian countries, America leads in five and they are neck and neck in two. Some countries, including India, have recently grown warier of the security risk posed by Chinese firms.

To prevail, America should focus on three priorities. The first is to get tougher with its treaty allies which have become wholly reliant on China, in particular Thailand and the Philippines. The latter is intensifying its military links with America even as its digital infrastructure is vulnerable, which makes little sense. Some countries, such as Pakistan and Cambodia, have ceded digital sovereignty to China and are lost causes.

Second, America should aim to develop an Asian alliance for cyber-security and artificial intelligence. In 2017 Donald Trump abandoned an ambitious regional trade deal, the Trans-Pacific Partnership, that would have governed digital commerce among many other things. Reviving that will be impossible, due to America’s protectionist turn, but a narrower agreement could plausibly be struck with some countries, giving them access to American technology in return for assurances of heightened caution over Chinese security risks.

Last, America’s intelligence agencies could shed more light on Chinese cyber-shenanigans. Public knowledge about the scale of Chinese snooping and hacking is limited. It is time to raise awareness that cheap Chinese digital infrastructure has a sting in its tail." [1]

1. A sting in the tail. The Economist; London Vol. 453, Iss. 9418,  (Oct 12, 2024): 11, 12.