How CBAMs Might Drive Global Climate Policy Momentum

RFF has a paper out on this topic: How Carbon Border Adjustments Might Drive Global Climate Policy Momentum. The abstract tells the story pretty well:

The introduction of the European Union carbon border adjustment mechanism (CBAM) creates an important incentive for other countries to adopt carbon pricing. The authors examine this policy spillover effect, finding that countries throughout the world have increased their use of carbon pricing regimes as well as their interest in both carbon pricing and decarbonization, especially in the period since the EU focused on this policy tool. If more countries, including the United States, consider border adjustment regimes, this can strengthen such policy spillover effects. However, care should be taken to address the needs of lower-income economies and to avoid disguised protectionism.

Indeed, the US has started to consider carbon border adjustments/tariffs in large part because of the EU's CBAM. And of course CCL has been advocating for a CBAM as part of the Energy Innovation Act for nearly two decades now, so we're way ahead of the curve! 🤓

RFF concludes:

If the United States adopted even a modest carbon price, that could enable the simultaneous achievement of three important goals: large US emissions reductions that would narrow or eliminate the gap between US policy and Paris Agreement commitments, large US government revenues to help finance the transition or meet other fiscal needs, and the potential for more collaboration with partners abroad that are addressing climate change. If the United States joins the European Union, Canada, the United Kingdom, and many others that are implementing carbon pricing alongside CBAMs, the incentives for other countries to follow suit will be magnified, and the United States will also have an important role in key design and implementation issues.

In short, a carbon price with a focus on the border would be a great policy, not only to curb our own climate pollution but also to encourage other countries to follow suit.

This and the opportunities to accomplish it in the next Congress are topics that Danny and one of this report's authors, Catherine Wolfram, will talk about in a great CCU this coming Thursday 10/17 @7:30pm ET, so don't miss it! [or if you miss it, there will be a recording, so at least don't miss that!]🤓

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