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Possible carbon adjustment policies: An overview

Author

Listed:
  • Cecilia Bellora

    (CEPII - Centre d'études prospectives et d'informations internationales)

  • Lionel Fontagné

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The new European Commission has announced policies to reduce greenhouse gas emissions drastically. Reaching an ambitious target for a global good – the climate – would require a common price for carbon worldwide. This however clashes with the free-riding problem. Furthermore, unilateral policies are not efficient since they lead to carbon leakages and distort competitiveness. To tackle these issues, the European Union can rely on different policies. Firstly, a carbon pricing of imports can combined with an export rebate to constitute a ‘complete CBA' (Carbon Border Adjustment) solution. Alternatively, a simple tariff at the border can compensate for differences in carbon prices between domestic and imported products. A consumption-based carbon taxation can al so be contemplated. Last, a uniform tariff on imports from countries not imposing (equivalent) carbon policies may help solving the free-riding problem.

Suggested Citation

  • Cecilia Bellora & Lionel Fontagné, 2020. "Possible carbon adjustment policies: An overview," PSE-Ecole d'économie de Paris (Postprint) hal-02880332, HAL.
    • Handle: RePEc:hal:pseptp:hal-02880332
    DOI: 10.2861/012273
    Note: View the original document on HAL open archive server: https://hal.science/hal-02880332
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    References listed on IDEAS

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    Keywords

    Carbon Border Adjustment; Climate Change; International Trade; Tariffs;
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