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Boris Johnson’s G7 dilemma: Carbon border tax proposals vs geopolitical realism

Vijay Jayaraj, India

India, the West’s most important geopolitical ally, will not concede its fossil fuel ambitions to the draconic carbon border taxes the G7 leaders intend to propose.

The upcoming G7 summit in the UK will be the first-time international leaders meet physically after the COVID-19 pandemic year. The summit at Cornwall will see the G7 countries discuss the increasing threat from China and seal strong geopolitical partnerships.  

The summit will also witness discussions on carbon border taxes and policy recommendations under the “build back better” theme. Prime Minister Boris Johnson aspirations to materialize the radical carbon border tax may however face opposition from India, given the latter’s clearly defined energy goals that demand an acceleration in the use of fossil fuels. 

It is no wonder, therefore, that the US administration is beginning to realise the potentially disastrous damage to Western interests and international relations from unilateral carbon border taxes.

G-7, fossil giants and the new carbon taxes

The Group of Seven (G-7) was originally a consortium of world’s leading economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. The European Union (EU) is also a core member of the G7 now.

In recent times, other countries have been considered as participants in the G7 meetings. In 2020, Trump wanted Australia, Brazil, India, Russia, and South Korea to join the meetings and his invitation was accepted by the leaders in respective countries. But the 2020 G7 meeting was postponed due to COVID-19. 

The next edition of the summit, the 47th G7 meeting, is scheduled to be held between 11 and 13 June 2021 in Cornwall, United Kingdom. This year, Australia, India and South Korea will be part of the meetings. The inclusion of these countries, especially India, will have a profound impact on the carbon tax related proposals that will be discussed during the meeting.

The meeting precedes the United Nations’ Conference of Parties (COP26) climate meeting, which is also scheduled to be held in the UK in November. Given the absence of Trump, and his replacement with a more climate alarmist Joe Biden, it is likely that climate policies will take center stage during the G7 summit. The Biden administration is defiant about using its foreign relations to persuade other countries to adopt stringent emission reduction policies.

Prime Minister Boris Johnson has revealed that the UK will use the G7 meeting to promote discussion and make a pathway for the establishment of the carbon border taxes (CBT). His Business Secretary Kwasi Kwarteng confirmed this and said, “There will be a discussion about carbon border adjusting, carbon leakage. That has to be part of the multilateral discussion.”

Meanwhile, the European Parliament’s environment committee has recently recommended the European Commission to implement a “carbon border adjustment mechanism” (CBAM) and use the revenue generated to fund the green transition programs in the EU. The EU is expected to make the CBAM official by June, possibly before the G7 meeting starts.

India’s geopolitical advantage: A dilemma for climate campaigners

India will be the sole representative of developing countries and the biggest fossil fuel consuming country in the meeting. India will not concede its fossil fuel ambitions to the draconic carbon border taxes that the G7 leaders intend to propose.

Besides, India is also the single largest democracy in the Indo-Pacific region, representing a stable partner to the Western democracies. The advantages of having India as an ally is far too important to be neglected for the sake of carbon border taxes and the G7 countries will thread carefully.

Australia, South Korea and to a certain extent Japan, are also expected to resist extreme proposals to cut down on fossil fuel consumption. In fact, Australia – -which has been invited to ­attend all sessions of the G7 ­summit — has  already made it clear that they won’t be a part of the carbon tax club at the G7 and Prime Minister Scott Morrison is determined to protect the country’s coal sector. These three countries may support India’s stance at the meeting and help the Asian coal giant from conceding to the carbon border taxes.

Furthermore, India’s recent tussle with Beijing makes it a natural ally for Japan. In a joint statement put out on March 9, 2021 prime minister Modi of India and prime minister Suga of Japan stated “that they would continue their effort to materialize the Japan-India Special Strategic and Global Partnership through cooperation in such areas as security and defense, economic relationship.”

Geopolitical and economic advantages by cooperating with India would outweigh any little gains both U.S. and Australia will gain from imposing a carbon tax on India. The EU’s recent trade deals with China will also push both the US and Australia to increase ties with India and not hurt its fossil ambitions.

Biden administration’s vision statement outlines the threat posed by China:

When the Chinese government’s behavior directly threatens our interests and values, we will answer Beijing’s challenge. We will confront unfair and illegal trade practices, cyber theft, and coercive economic practices that hurt American workers, undercut our advanced and emerging technologies, and seek to erode our strategic advantage and national competitiveness.”

As an initial step to counter this threat, Biden is keen on galvanising ties within the Quadrilateral Security Dialogue (Quad) group – a consortium of four nations which includes Japan, India and Australia. During the Quad Summit held on 12 March, a joint statement stressed the need to counter China’s threat:

We have convened to reaffirm our commitment to quadrilateral cooperation between Australia, India, Japan, and the United States. We bring diverse perspectives and are united in a shared vision for the free and open Indo-Pacific. We strive for a region that is free, open, inclusive, healthy, anchored by democratic values, and unconstrained by coercion.”

Experts on the matter state that the Quad cooperation provides a backbone for broad Indo-Pacific maritime security cooperation that tamps down China’s brinkmanship across the region.

Boris Johnson is visiting India this spring to enhance trade ties between the countries and is believed to be a part of the UK’s strategy to combat China’s threat, with the foreign secretary Dominic Raab terming it as “Britain’s new Indo-Pacific tilt.” The UK government  has stated that the Indo-Pacific region is becoming the “geopolitical centre of the world.”

The UK has had trade troubles with China recently and Beijing has been branded as the biggest state-based threat to the UK’s economic security. It has also labelled Russia as a major security threat. This week, the British government said in a review that it would increase defense spending by £24 billion ($33.3 billion) over the next four years and that “China’s increasing power and international assertiveness is likely to be the most significant geopolitical factor of the 2020s.”

For Boris Johnson, the prospect of having much stronger economic ties and a geopolitical partner in India in the Indo-pacific region will be very critical, and this factor may prove to be a major hurdle when he attempts to coerce India into accepting UK’s new carbon taxes.

India will not compromise on its energy rights

India is aware of its unique geopolitical advantage and will ensure that the carbon tax frenzy doesn’t impact its exports and domestic energy sector. India’s energy demand growth (25%) will the biggest globally during the next two decades. The energy consumption is set to surpass that of the entire European Union by 2030.

Fossil fuels make up the majority of this energy consumption and there cannot be a compromise on fossil fuel production or import. The country is in a position where only fossil fuels can help it to meet the project increase in energy demand.

Weighing in his support for India, the International Energy Agency (IEA) chief Fatih Birol said that it would be unfair to ask India to stop using coal or make a swift transition.

Climate change issue we have today, (that is) concentration of carbon in the atmosphere is not an issue of today. It is an issue of almost last 100 years. And many countries, so-called advanced economies, came to this industrialized levels and income levels by using a lot of coal. These are the US, Europe, Japan”, said Birol.

He insisted that, “It wouldn’t be fair to go to a developing country and to say ‘your coal is creating a problem for the climate change, so shut it down’. It wouldn’t be fair and I am not a supporter of that.”

With the approval of 32 new coal mining projects in March 2021 and the home minister’s open support for the coal sector’s integral role in progression of Indian economy, the Indian government is holding no punches back.

The G7 meeting could be a diplomatic window of opportunity where India may take advantage of geopolitical partnership that the UK and the US are seeking from it. In return, India will expect the G7 to respect its energy rights to expand the use of cheap and reliable fossil fuels.

see also

* Europe’s Green Deal in trouble as Biden administration warns EU against carbon border tax

* Vijay Jayaraj: Wary of the new green wave, India continues to increase its coal capacity

* Vijay Jayaraj: China and India are growing their coal ambitions

* Vijay Jayaraj: India Crafts Fossil Pathway to Secure its Future