Bangladesh's largest export market, the European Union (EU), has taken initiatives to impose a carbon tax on imported goods. A carbon tax is a fee imposed on burning of carbon-based fuel like coal, oil and gas to reduce the emission of carbon dioxide.
The EU plans to impose a carbon tax on 44 sectors, including chemical products, basic metals, paper products, non-metallic mineral products, textiles and apparels, pharmaceuticals, leather and footwear, and plastic, because of their high carbon footprint.
EU countries are the destinations for more than half of Bangladesh's total exports. In the previous financial year, exports to Europe amounted to $18.7 billion under the Everything but Arms (EBA) GSP scheme.
Bangladesh enjoys duty-free exports of all products except arms. If the EU imposes a carbon tax on imported goods as part of the Carbon Border Adjustment mechanism, it will apply to Bangladesh's export products as well.
I welcome these initiatives. Like the Europeans, we also want carbon emissions to be reduced over time.
The EU, a single market for 26 countries, will impose the tax based on per tonne carbon emitted during the manufacturing of these products. The European Commission will announce the tax rate and the method of tax calculation in the second quarter of this year.
But who will pay the carbon tax?
If the European Union one-sidedly decides to impose the total tax on the manufactures' shoulders, ultimately, we, the manufacturers in Bangladesh will be the losers. The buyers from the European Union will also have to step forward and pay some tax as a part of the initiative.
Bangladesh, as a developing country, is proud of having the largest number of LEED-certified platinum-rated garment factories in the world. More than 25 Bangladeshi apparel factories have achieved the highest certificate provided by the US Green Building Council. But what is the benefit? Will the buyers pay the two to three cents extra for making our factories green? They are yet to do so.
Suppose, a T-shirt costs one dollar and 50 cents, if we demand one dollar and 52 cents then the buyers would outright refuse to do business. We do not feel encouraged when they refuse to give us extra money for making our garment factories meet their environmental standards. We are investing a lot but have yet to reap significant benefits from it.
Although the European Union's initiative is a good one, there are some costs involved in the initiative.
If the European Union wants to impose a carbon tax, the buyers will have to agree to spend some money for its implementation. And to do that, the European Union will have to make their buyers aware of paying a fair price to the manufacturers.
Moreover, the EU will have to give Bangladeshi manufactures the scope for negotiations in the decision and implementation of the carbon tax, and involve the European buyers in the process. If all stakeholders are not involved in the implementation of the carbon tax, the initiative will not be successful.
If the European Union one-sidedly imposes a carbon tax, without all the stakeholders being aware and participating in the issue, the initiative will not be successful. The European Union should let us (Bangladeshi manufacturers) voice our opinions before moving forward with their plans.
Whenever the European Union takes any initiative, we always welcome it. In the past, the European Union, Japan or Germany took many initiatives for the wellbeing of us all. However, when India or the USA take any initiative, it usually has an adverse impact on our industry.
Russia has already opposed the initiative of imposing a carbon tax and has lodged a complaint to the World Trade Organisation (WTO). Bangladesh can follow suit if European Union one-sidedly tries to impose a carbon tax. But Bangladesh has no intention of lodging complaints against the initiative unprovoked. We want to take the initiative positively.
The author is the First Vice President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA)