France persuades Germany to consider EU carbon border tax

BERLIN (Reuters) - France has convinced Germany to look into a European carbon border tax to protect companies investing in green technology from emission-intensive competition from abroad, a move that could heighten trade tensions with the United States.

It is the first time the German government has officially shown a willingness to look into the creation of such a levy, pushed for by French President Emmanuel Macron.

European companies are concerned they could face unfair competition from countries with less rigid climate protection. U.S. President Donald Trump has pulled his country out of the international Paris climate protection deal that aims to reduce carbon emissions.

In a joint statement released on Thursday by the economy and finance ministers of the two biggest euro zone economies, Berlin and Paris said the fight against climate change was a priority for both governments and the creation of a carbon border tax should be an option.

“We fully support the work on the strategy planned by (European Commission) President-elect (Ursula) von der Leyen, to examine possible measures to prevent carbon leakage, inter alia a carbon border tax,” the statement read.

Macron has repeatedly called for such a carbon border tax to shield European companies that support carbon-reduction efforts with investments in green technology from “dirty” competition from outside the bloc.

Germany so far has been reluctant to endorse the idea, warning that such a move could fuel already increased trade tensions with the United States and possibly make Washington retaliate with counter measures.

The European Union is considering new energy taxes, including on the aviation sector, to meet its climate targets, with Germany calling for “drastic steps” to reduce carbon emissions.

German coalition parties aim to present a climate protection package on Friday with measures that are likely to include a carbon-pricing initiative to cap the use of fossil fuels in Europe’s largest economy.

Reporting by Michael Nienaber; Editing by Alex Richardson