carbon border adjustment mechanism

In its joint response [1] to an earlier consultation, the UK Department for Energy Security and Net Zero and HM Treasury has confirmed that a UK CBAM will be implemented by 2027. The CBAM will impose a levy on those importing the most greenhouse gas (GHG) emissions-intensive products into the UK, which will reflect the gap between the carbon price that would have been imposed if the good had been produced in the UK and the carbon price already applied in the country of origin, if any. In doing so, the UK government is seeking to avoid “carbon leakage”: the phenomenon of UK based entities importing emissions-intensive products from outside the UK to avoid the charges placed on emissions-intensive products produced in the UK through the UK Emission Trading System (ETS). With the EU CBAM already up and running in its transitional phase from October this year (2023), and in the absence of any internationally agreed measures, similar and respons...

Rising trade tensions between the U.S. and the European Union, two of the most important global leaders when it comes to climate policy, could undermine key climate initiatives of both governments and make it harder for the world to put the brakes on climate change. The two have clashed over the 2022 Inflation Reduction Act’s requirements that products be made in America to receive certain U.S. subsidies. The EU recently announced plans for its own domestic-only clean technology subsidies in response. The U.S. and EU also now have competing carbon tariff proposals, and these could end up undermining each other. In December 2022, the EU reached a provisional agreement on a carbon border adjustment mechanism. It will put carbon-based tariffs on steel, aluminum and other industrial imports that aren’t regulated by comparable climate policies in their home countries. The Biden administration, meanwhile, proposed a “green steel club” of nations that would coo...

The European Union is embarking on an experiment that will expand its climate policies to imports for the first time. It’s called a carbon border adjustment, and it aims to level the playing field for the EU’s domestic producers by taxing energy-intensive imports like steel and cement that are high in greenhouse gas emissions but aren’t already covered by climate policies in their home countries. If the border adjustment works as planned, it could encourage the spread of climate policies around the world. But the EU plan – which members of the European Parliament preliminarily agreed to on Dec. 13, 2022 – as well as most attempts to evaluate the impact of such policies, is missing an important source of cross-border carbon flows: trade in fossil fuels themselves. As energy analysts, we decided to take a closer look at what including fossil fuels would mean. In a newly released paper, we analyzed the impact and found that including fossil fuels in...