Brussels and Washington realigned on climate

Cecilia Bellora (1) , Lionel Fontagné (2)

1 CEPII - Centre d'Etudes Prospectives et d'Informations Internationales
2 CES - Centre d'économie de la Sorbonne

On March 10, 2021, the European Parliament adopted a resolution on the border carbon adjustment mechanism that the European Commission committed to setting up. How would this adjustment work and what would be its consequences? By reducing the incentive to displace production of high-emitting products to countries with little or no carbon tax, the carbon adjustment mechanism would reduce "carbon leakage" but increase the price of carbon in the European Union (EU). Therefore, European industries that use as inputs goods subject either to the carbon tax or to the carbon adjustment are at risk of a loss of competitiveness. However, the main challenge in addressing climate change is the participation of the major emitting countries in the effort to abate greenhouse-gas emissions. While the European mechanism could help the EU in strengthening its emissionreduction targets, it is above all the compliance of the United States with the commitments made in the Paris Agreement that will make it possible to save one year's worth of global emissions by 2035, pending a more concrete commitment from China.

Domaines: Economies et finances

Cecilia Bellora, Lionel Fontagné. Brussels and Washington realigned on climate. La Lettre du CEPII, 2021. ⟨hal-03202524⟩