By Andy Stone

In June the European Union’s director general for trade announced that the EU is developing a carbon border levy that will be imposed on imports of carbon-intensive goods such as steel and cement. The border adjustment, part of Europe’s Green Deal to dramatically curtail carbon dioxide emissions, in part through carbon pricing, will aim to protect the bloc’s industries from cheaper foreign goods from countries where no carbon price is in place. The EU will release its finished proposal by mid-2021.

On this side of the Atlantic, the eight carbon pricing proposals now circulating through Congress all include border adjustments to protect American companies from imports not burdened by a carbon price in their country of origin. A corresponding refund of the carbon price on American exports would help ensure that American goods sold overseas are not priced out of foreign markets.

With all of the attention paid to carbon border adjustments, it would seem that they must be a good thing. Yet the full story is more complex. Border adjustments are a zero-sum game if not carefully designed, and where there are winners, there are likely those that won’t fare so well.

In an oft-cited 2016 paper, University of Chicago law professor David Weisbach and Yale economist Sam Kortum explore the impact of border adjustments on consumers.

Continue Reading at Forbes…

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Climate Change
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Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Climate Economics
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Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...
A Solution to the Leakage Problem
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A Solution to the Leakage Problem
A simple, clearly legal, and more effective alternative to border tax adjustments could be to tax domestic extraction along with border adjustments on imports and exports of energy.
Definition
Fossil Fuels
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...