EU Carbon Border Adjustment with the US rejoining Paris: A bit of a game changer

Cecilia Bellora and Lionel Fontagné

No 330216, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The new European Commission in office since December 2019 has announced that the EU will be climate neutral by 2050. A series of measures of the proposed "European Green Deal'" will back this ambition, and among those a Carbon Border Adjustment Mechanism (CBAM) scheduled for July 2021. The CBAM aims to impose a carbon price on imported products whose production-related emissions have not been taxed (or not at the same level as in the EU) by the exporting country. The ENVI Committee of the European Parliament adopted a resolution the 10th March 2021 validating the principle of a WTO-compatible European mechanism for border carbon emission adjustments. When this compensation mechanism was announced by the Commission, the United States was outside the Paris Agreement, its withdrawal had been initiated by the Trump Administration. But they have just joined it again. Does the U.S. reversal give Europe hope to achieve its climate ambitions at a reasonable cost? We are not the first to quantify the economic and environmental efficiency of a compensation at the border. But different from the previous literature, we evaluate (with MIRAGE-VA) the proposal of the European Parliament -- with and without rebate to the EU exporters -- and focus on what the come-back of the US in the Paris agreement changes in terms of impact on emissions, compared to the CBAM.

Keywords: International Relations/Trade; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 30
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:330216

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