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EU’s new Carbon Tax can impact and reduce RMG exports from Bangladesh


EUs new Carbon Tax can impact and reduce RMG exports from Bangladesh

To transform Europe into a carbon neutral continent, the European Union (EU) plans to impose carbon tax as a part of the EU's Green Deal in several sectors. The risk list currently does not include Bangladesh’s main export products, garments and leather items. However, they are likely to be added at any time in future. Their addition to the list could hurt exports, warn experts, they also advise Bangladesh to introduce carbon tax and carbon market in the country besides focusing on renewable energy.

Transforming EU into a resource-efficient economy

A new growth strategy, the European Green Deal aims to transform the EU into a modern, resource-efficient and competitive economy with zero greenhouse gas emissions by 2050. A part of the Green Deal, the Carbon Tax will be levied on imports from foreign companies by EU listed buyers. The Carbon Tax will also make it mandatory for EU importers to declare emissions embedded in imports and surrender the corresponding number of certificates each year. If importers can prove that a carbon price has already been paid during production of the imported goods, the corresponding amount can be deducted.

Carbon tax to hinder exports

According to initial assessment of RAPID, the EU might include apparel, leather and footwear in its list of 63 sub sectors deemed at risk for carbon leakage in future. Taxing these products can hinder exports and competitiveness. They may reduce exports of the targeted carbon-intensive sector from developing countries by 2.4 per cent, says United Nations Conference on Trade and Development (UNCTAD). However, apparel entrerpeneurs continue to remain unfazed by EU’s move. Md Fazlul Hoque, Managing Director, Plummy Fashions opines, Bangladesh will continue to march ahead of other countries in green initiative.

Focus on renewable energy

Rumana Huque, Economics Professor, Dhaka University believes, Bangladesh may lag behind competitors if it does not immediately begin to study the issue in detail and prepare in light of the standards of buyer countries. MA Razzaque adds, if Bangladesh is already preparing to pay the carbon tax, then it will not have to pay for export of goods to EU countries. It can instead focus on renewable energy.


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