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EU carbon border adjustment mechanism faces many challenges

Author

Listed:
  • Gary Clyde Hufbauer

    (Peterson Institute for International Economics)

  • Jeffrey J. Schott

    (Peterson Institute for International Economics)

  • Megan Hogan

    (Peterson Institute for International Economics)

  • Jisun Kim

    (POSCO Research Institute)

Abstract
This Policy Brief assesses the evolving EU Emissions Trading System and EU carbon border adjustment mechanism (CBAM) and explains objections within Europe and from major trading countries likely to be affected by the proposed CBAM import levies. While EU officials have sought to ensure that the CBAM is consistent with obligations under the World Trade Organization (WTO), key aspects of the CBAM could violate WTO rules and are likely to be contested, taking years to play out. Meanwhile, several other countries will adopt new carbon-inspired border restrictions, adding to global trade frictions. Major carbon-emitting countries, therefore, need to act cooperatively instead of unilaterally to both advance the fight against climate change and update the rules-based global trading system. Two-thirds of greenhouse gas emissions result from nontraded activities, such as road transport, electricity generation, and home and office heating. Countries can curb emissions in these activities, while developing guidelines for carbon abatement in traded sectors.

Suggested Citation

  • Gary Clyde Hufbauer & Jeffrey J. Schott & Megan Hogan & Jisun Kim, 2022. "EU carbon border adjustment mechanism faces many challenges," Policy Briefs PB22-14, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb22-14
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    File URL: https://www.piie.com/publications/policy-briefs/eu-carbon-border-adjustment-mechanism-faces-many-challenges
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    Cited by:

    1. Marcel Lumkowsky & Emily K. Carlton & David G. Victor & Astrid Dannenberg, 2023. "Determining the willingness to link climate and trade policy," Climatic Change, Springer, vol. 176(10), pages 1-24, October.

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