Mark Finley does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and ha

What if carbon border taxes applied to all carbon – fossil fuels, too?

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2022-09-21 18:00:11

Mark Finley does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

The European Union is embarking on an experiment that will expand its climate policies to imports for the first time. It’s called a carbon border adjustment, and it aims to level the playing field for the EU’s domestic producers by taxing energy-intensive imports like steel and cement that are high in greenhouse gas emissions but aren’t already covered by climate policies in their home countries.

If the border adjustment works as planned, it could encourage the spread of climate policies around the world. But the EU plan, as well as most attempts to evaluate the impact of such policies, is missing an important source of cross-border carbon flows: trade in fossil fuels themselves.

In a newly released paper, we analyzed the impact and found that including fossil fuels in carbon border adjustments would significantly alter the balance of cross-border carbon flows.

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