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Brussels and Washington realigned on climate

Cecilia Bellora and Lionel Fontagné ()
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Cecilia Bellora: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: On March 10, 2021, the European Parliament adopted a resolution on the border carbon adjustment mechanism that the European Commission committed to setting up. How would this adjustment work and what would be its consequences? By reducing the incentive to displace production of high-emitting products to countries with little or no carbon tax, the carbon adjustment mechanism would reduce "carbon leakage" but increase the price of carbon in the European Union (EU). Therefore, European industries that use as inputs goods subject either to the carbon tax or to the carbon adjustment are at risk of a loss of competitiveness. However, the main challenge in addressing climate change is the participation of the major emitting countries in the effort to abate greenhouse-gas emissions. While the European mechanism could help the EU in strengthening its emissionreduction targets, it is above all the compliance of the United States with the commitments made in the Paris Agreement that will make it possible to save one year's worth of global emissions by 2035, pending a more concrete commitment from China.

Date: 2021-02-26
New Economics Papers: this item is included in nep-ene and nep-env
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Published in La Lettre du CEPII, CEPII, 2021

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