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A CO₂-border adjustment mechanism as a building block of a climate club

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  • Bierbrauer, Felix
  • Felbermayr, Gabriel
  • Ockenfels, Axel
  • Schmidt, Klaus M.
  • Südekum, Jens

Abstract

The EU steps up its efforts to curb its territorial CO2-emissions. It is planning to introduce a carbon border adjustment mechanism (CBAM) to level the playing field and to raise own resources. However, unilateral European climate policy action, whether shored up with a CBAM or not, can only play a limited role in reducing global CO2-emissions. A U-CBAM cannot stop indirect leakage, it has ambiguous effects on other countries' mitigation efforts, and it poses the risk of conflicts with trade partners.The EU, together with the US and other like-minded countries, should push hard to establish a climate club with a common minimum price of CO2and a common CBAM applied to third countries. Such a framework would incentivize other countries to join while limiting leakage and reducing the risk of trade policy disputes.

Suggested Citation

  • Bierbrauer, Felix & Felbermayr, Gabriel & Ockenfels, Axel & Schmidt, Klaus M. & Südekum, Jens, 2021. "A CO₂-border adjustment mechanism as a building block of a climate club," Kiel Policy Briefs 151, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkpb:151
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    References listed on IDEAS

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    Cited by:

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    2. Mörsdorf, George, 2022. "A simple fix for carbon leakage? Assessing the environmental effectiveness of the EU carbon border adjustment," Energy Policy, Elsevier, vol. 161(C).
    3. Claudia Kettner & Gerald Feichtinger, 2021. "Fit for 55? Das neue Klima- und Energiepaket der EU," WIFO Monatsberichte (monthly reports), WIFO, vol. 94(9), pages 665-677, September.
    4. Galina Kolev, 2021. "Carbon Border Adjustment and Other Trade Policy Approaches for Climate Protection," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 310-316, November.
    5. Best, Frank, 2023. "The EU Carbon Border Adjustment Mechanism and its Influence on Steel Imports from Taiwan," EconStor Conference Papers 285308, ZBW - Leibniz Information Centre for Economics.
    6. Wifo, 2021. "WIFO-Monatsberichte, Heft 9/2021," WIFO Monatsberichte (monthly reports), WIFO, vol. 94(9), September.

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