Safeguarding Europe’s climate protection
The corona crisis is highlighting the importance of the EU Commission’s considerations of a border carbon adjustment. An MCC Policy Brief shows the options for dealing with free riding.
Raising the prices of climate-damaging imports into Europe is part of the EU Commission’s European Green Deal concept presented at the end of 2019. Due to the corona crisis, the topic is now gaining in relevance. "Sustainability should be taken into account in the economic stimulus packages that are now expected worldwide – but if governments set different priorities, the pressure to safeguard EU climate protection will grow," says Michael Jakob, expert on world trade at the Berlin-based climate research institute MCC (Mercator Research Institute on Global Commons and Climate Change). "The extent to which free riding can be addressed by a border carbon adjustment needs to be clarified. The aim is to prevent emissions avoided in the EU merely shifting to other regions of the world.”
A new MCC Policy Brief now explains this effect of “carbon leakage”, and highlights the relevant policy options. In order to become climate neutral by 2050, the EU plans to increase pricing of emissions of the most important greenhouse gas carbon dioxide (CO2), possibly even extending this to all sectors. With border carbon adjustment, such pricing would be applied to imports as well (through import duties or by obliging importers to buy certificates for EU emissions trading); exports would be reimbursed accordingly. "You can design a textbook border adjustment or shape it politically, as a means of strategic pressure," explains MCC researcher Jakob. "There are some indications that a pragmatic solution will emerge in the end. This might be a border adjustment just for some energy- and trade-intensive sectors, which would limit carbon leakage to some extent.”
The MCC Policy Brief on carbon leakage, free riding, and border carbon adjustment is available here.