Carbon border tax explained (IV) How should an EU carbon border tax be designed?

We continue with part IV of our series Carbon border tax explained. See part I, part II, and part III if you have missed them. Experts believe that designing an Border Carbon Adjustment (BCA) that effectively contributes to reducing global greenhouse gases emissions without jeopardising the multilateral trading system is difficult, but possible. The following expert recommendations should be observed in the design of a carbon border tax for the European Union. [Read More]

Carbon border tax explained (III) What are the potential problems?

We continue with part III of our series Carbon border tax explained. See Part I and Part II, if you have missed them. In view of these benefits, why aren’t European politicians and EU officials all up for it? The answer is that the introduction of a Border Carbon Adjustment (BCA) has a number of caveats, most notably it’s technical complexity and the difficulty of designing a scheme that is compatible with internal trade law. [Read More]

Carbon border tax explained (II) What is a carbon border tax?

We continue with part II of our series Carbon border tax explained. See part I, if you have missed it. There are several motivations for the European Union to consider introducing a Border Carbon Adjustment (BCA) regime: Avoid carbon leakage Carbon leakage means that the positive CO2 reduction effect that a tightening of the EU’s environmental legislation would have within the EU is offset by the additional CO2 emitted outside the EU, possibly leading to an overall increase in emissions. [Read More]

Carbon border tax explained (I) What is a carbon border tax?

The European Union has an Emissions Trading System (ETS) in place. European industries pay a price per ton of CO2 emitted, currently about 25 percent per ton, if they exceed their originally granted emissions allowances. The current scheme has been criticised for setting the carbon price too low for it to be an effective regulatory mechanism and for giving free emissions allowances to some energy-intensive industries. The EU industry and many politicians understandably argue that unilaterally raising the carbon price would weaken the industry’s competitiveness as foreign companies don’t have to pay for emitting CO2, which makes their products comparatively cheaper. [Read More]

Carbon border tax explained Can it be the key to an effective EU climate policy which does not jeopardise economic competitiveness?

World leaders are meeting these two weeks at the 25th Conference of the Parties to the UNFCCC (COP25) in Madrid to discuss, once again, how they will step up their national climate commitments (‘nationally determined contributions, or NDCs’) by 2020. Commentators see very few signs that a breakthrough will be reached at this COP, especially since major emitters such as the USA or China have not expressed any intentions of enhancing their NDCs. [Read More]