“How to implement a WTO-compatible full border carbon adjustment as an important part of the European Green Deal”, Alexander Krenek (ÖGFE)

The European Commission has announced to step up carbon emission reduction targets for 2030 and 2050, respectively. These targets would require even bigger efforts to price carbon emissions at the EU as well as at the national level. The EU and its member states will find themselves in a position of increasing costs of production due to those efforts while other emitters such as China, acting within the Paris Agreement framework, will be allowed to increase their emissions until 2030. The United States are exiting from the Paris agreement altogether and are actively reducing environmental standards. In this situation the calls for implementing a border carbon adjustment (BCA) to complement the EU Emission Trading System (ETS) are becoming louder. Most recently, the new von der Leyen European Commission in their just released plans for a European Green Deal announced to propose a BCA mechanism for the EU. In theory a BCA would be a perfect mechanism to enable unilateral carbon pricing avoiding a loss of competitiveness and the resulting carbon leakage visà-vis third countries. Implementation of an EU BCA, however, is not only politically contentious, but also rather complex from a legal perspective. This policy brief therefore focuses on issues of implementation.

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