While the European Green Deal has been widely hailed as a major leap forward for the EU’s global climate leadership, the new climate strategy does include a controversial policy initiative that is likely to have considerable repercussions for EU trade partners across the world: a Border Carbon Adjustment Mechanism (BCA), commonly referred to as a carbon border tax. Such a carbon border tax would put a levy on goods imported into the EU, based on the emissions emitted during the production process – something which would allow the EU to prevent the relocation of industrial production to countries where climate policies are weaker (known as “carbon leakage”).

Even though the European Commission notes in the Green Deal that the BCA is first and foremost a tool to reduce the risk of carbon leakage, the initiative goes way beyond the technicalities of preserving the EU’s international competitiveness. In fact, the BCA is right at the heart of a broader geopolitical question: it reflects the Commission’s willingness to play hardball in matters of climate politics by applying tough economic measures against less ambitious international actors. As one high-ranking EU-official put it recently on the BCA, “the EU cannot be naïve – if others are not committed [to climate ambition], we need to take action” – a revealing statement that is characteristic for a new EU external climate policy, one that aims to be more assertive, more interest-driven, or to remain in “Brussels-jargon”, more sovereign. Next to tackling carbon leakage, the BCA is thus directed at a further objective: inducing global, non-EU emitters to take stronger climate action by imposing a firmer climate diplomacy.

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