How von der Leyen could make a carbon border tax work

(Climate Change News, 22 Jul 2019) The next European Commission chief must tread carefully if she is to meet her promise to make polluting importers pay.

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Following a tight vote in the European Parliament, Ursula von der Leyen was confirmed last week as the next president of the European Commission.

In her efforts to win over green and progressive lawmakers, von der Leyen proposed several new, potentially far-reaching climate policies.

One of her most eye-catching suggestions was a “carbon border tax”. According to von der Leyen, such a measure would need to be aligned with World Trade Organization (WTO) rules, and should gradually expand its sectoral coverage.

Her call was presented as part of a “green deal” for Europe, which includes legislation to set a target of climate neutrality by 2050. She also suggests that the existing greenhouse gas emission reduction target of 40% from 1990 levels by 2030 could be strengthened to 50% or even 55%.

The main purpose of adjusting for carbon costs at the border is to prevent the relocation of carbon-intensive production to non-EU countries, a problem known as “carbon leakage”. When firms outsource production to avoid carbon costs, their emissions occur abroad instead, reducing the effectiveness of EU climate policy.

To tackle such leakage, the EU currently hands out free allowances to trade-exposed industries under its emissions trading system (ETS).

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Climate Change News, 22 Jul 2019: How von der Leyen could make a carbon border tax work