Franco-German cooperation in support of the European Green Deal: pricing of carbon in and at the border of Europe
The European Union (EU) has proclaimed the Green Deal as its principal growth strategy, announcing as its key target to reach carbon neutrality by 2050. In consequence, effective immediately, member states will have to increase their efforts to reduce emissions, inducing steeply rising mitigation cost. The best coordination signal in this endeavor would be a uniform price on carbon which encompasses all actors, sectors, regions, and technologies. To ascertain that all goods consumed in the EU face the same carbon price, it is sensible to credibly prepare the implementation of border carbon adjustments (BCA) applied to imported goods. To preserve the EU’s self-conception of taking responsibility for the global climate it should refrain, however, from exempting exports from carbon pricing. A BCA mechanism should be considered by the EU only after having established a clear and credible uniform carbon pricing mechanism within its jurisdiction. This credibility is key to provide incentives to other countries, especially the US and China, to join a far-reaching international alliance for carbon pricing.
Deutsch-Französischer Rat der Wirtschaftsexperten