There is growing consensus that a carbon price that reflects the true cost of emitting CO2 is an indispensable instrument to achieve the climate targets. Nevertheless, increasing the price of carbon in one part of the world is likely to lead to the phenomenon of “carbon leakage”- the relocation of production processes to countries where the cost of emitting is less due to fewer environmental regulations, with the result that emissions remain constant.
A border adjustment mechanism, which imposes a carbon price on imported goods, could remove this hurdle and contribute to an effective pricing of emissions. This policy brief shows how such a mechanism can be implemented in practice and which issues play a key role.
Authors: Swantje Fiedler, Ann-Cathrin Beerman
Publisher: Forum Ecological-Social Market Economy