The missing link in an international framework for carbon pricing: border adjustment with taxes or allowances

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The Paris agreement signifies a watershed in climate mitigation efforts, but is based on a bottom-up approach leaving decisions on targets, measures and policy instruments to its signatories. Yet, in tandem with the Paris Agreement a new international coalition on carbon pricing among the willing was created at the initiative of the World Bank and the International Monetary Fund. Over the past five years the share of global CO2 emissions subject to carbon pricing via either taxes or allowances have tripled, from four to twelve per cent. In anticipation of a widening gap between countries the scope for border adjustments relative to carbon pricing deserves more scrutiny. Border adjustments would involve imports being priced for their associated emissions to the same level as domestic goods, while exports to non-price countries may become eligible to refunds. Trade agreements under WTO could presumably allow for such adjustment under its exemption mechanisms and when all other options have been exhausted. As a highly sensitive measure, not only the complex technical and legal questions deserve attention, but also how to make the best diplomacy of it within the arsenal of climate change mitigation policy tools.
Original languageEnglish
Title of host publicationState aids, taxation and the energy sector
EditorsMarta Villar-Ezcurra
PublisherKarnov Group
Publication year29 Apr 2017
Chapter22
ISBN (print)9788491353553
Publication statusPublished - 29 Apr 2017

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