Pricing of carbon within and at the border of Europe
The EU has announced reaching carbon neutrality by 2050 as the key target of its Green Deal strategy. The best coordination signal in this endeavour would be a uniform and encompassing price on carbon. To ascertain that all goods consumed in the EU face the same carbon price, it would be sensible to credibly prepare the implementation of border carbon adjustments applied to imported goods. This column argues, however, that the EU should refrain from exempting exports from carbon pricing, and should consider a border carbon adjustment mechanism only after having established a credible uniform carbon-pricing mechanism within its jurisdiction. This could provide incentives to other countries to join a far-reaching international alliance for carbon pricing.
Schmidt, C., M. Fratzscher, N. Fuchs-Schündeln, C. Fuest, C. Gollier, P. Martin, I. Méjean, X. Ragot, K. Schubert und B. Weder di Mauro (2021), Pricing of carbon within and at the border of Europe. VOX CEPR Policy Portal, 06.05.2021.