Possibility to Set Up a Carbon Adjustment Mechanism on Selected Sectors

The European Green Deal includes the goal of enshrining the long-term objective of climate neutrality by 2050 in legislation and increasing the EU's climate by 2030. In this context, the Green Deal emphasized that "should differences in levels of ambition worldwide persist, as the EU increases its climate ambition, the Commission will propose a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage". This project assesses the design options, implications and scope of carbon border adjustment mechanisms (CBAM) or alternative measures such as a carbon border adjustment for imports, a CBA on imports and exports, an excise with border adjustment in combination with continued free allocation, or a carbon added tax.

The Ecologic Institute is partner in a consortium led by Karsten Neuhoff (DIW) and involving Ramboll, the University of Erlangen and UBA Austria. Michael Mehling contributed an overview of existing Carbon Border Adjustment Mechanisms as applied in other jurisdictions, with particular focus on the electricity sector. Benjamin Görlach discussed the options how a CBAM could be differentated to recognise climate ambition in third countries. The results of this study for DG TAXUD will support the Impact Assessment for the upcoming CBAM proposal, which the EU Commission is expected to table in the summer of 2021.