A CO₂-border adjustment mechanism as a building block of a climate club

Felix Bierbrauer, Gabriel Felbermayr, Axel Ockenfels, Klaus M. Schmidt and Jens Südekum
Authors registered in the RePEc Author Service: Jens Suedekum

No 151, Kiel Policy Brief from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The EU steps up its efforts to curb its territorial CO2-emissions. It is planning to introduce a carbon border adjustment mechanism (CBAM) to level the playing field and to raise own resources. However, unilateral European climate policy action, whether shored up with a CBAM or not, can only play a limited role in reducing global CO2-emissions. A U-CBAM cannot stop indirect leakage, it has ambiguous effects on other countries' mitigation efforts, and it poses the risk of conflicts with trade partners.The EU, together with the US and other like-minded countries, should push hard to establish a climate club with a common minimum price of CO2and a common CBAM applied to third countries. Such a framework would incentivize other countries to join while limiting leakage and reducing the risk of trade policy disputes.

Keywords: Climate Policy; Carbon Leakage; Carbon Border Adjustment; Climate Club; Klimapolitik; Carbon Leakage; CO2-Grenzausgleich; Klimaclub (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkpb:151

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