iStock by Getty Images/NaLha

Facts and Findings

Carbon border adjustment mechanism: Tax or tariff for the climate?

by Jan Cernicky, Armin Hartlieb

How can the EU enforce more stringent climate targets and at the same time prevent industry from migrating?

The EU is planning to introduce a carbon border adjustment mechanism. The background to this is the more stringent climate targets and concerns that industry could migrate. But how to design such an adjustment mechanism? Our Facts & Findings presents three options and discusses the respective advantages and disadvantages of these instruments.
In light of the EU’s more ambitious climate targets, the European Commission intends to introduce a carbon border adjustment mechanism in order to stem carbon leakage.
Three possible configurations are under discussion: a kind of consumption tax, a tariff on the carbon content of imported goods, and the inclusion of imports in the EU-wide emissions trading system.
There is no ideal carbon border adjustment mechanism. Key problems are WTO conformity, the calculation of the "carbon content", and compatibility with existing climate protection measures.
In this context, climate diplomacy does not lose significance. In contrast, it has to be hoped that an EU border adjustment mechanism is ultimately made redundant by a climate protection regime covering all important trading regions.
Read our facts & findings here as a PDF.
Event Reports
October 30, 2020
Read more

To commit you must sign in.