Emission Critical: The EU'S Carbon Border Adjustment Mechanism

Trade Bites

This episode looks at the climate crisis, and specifically the trade policy response to the push towards net zero in Europe and around the world. A whole market infrastructure has been created in Europe and elsewhere with carbon emission allowances being bought and sold as a way of taxing high-emission producers and providing a financial incentive to encourage more climate-friendly production systems. However, some countries worry that heavy industry might relocate because their climate regulation makes it too expensive to operate. This could be bad for global climate action, as it will result in more greenhouse gas emissions in less regulated countries – a problem called Carbon Leakage. The European Commission’s Carbon Border Adjustment Mechanism (CBAM) aims to address Carbon Leakage by requiring (for certain products) both imported and domestic products to pay the same carbon price. How will it work? Is it compatible with the rules of the World Trade Organization? And, should the UK have its own version? Dr Ioannis Zachariadis, Policy Officer at the European Commission’s Directorate-General for Taxation and the Customs Union joins Chris Horseman and Dr Emily Lydgate, Deputy Director of the UK Trade Policy Observatory, along with Dr Camilla Jensen, and Dr Peter Holmes, both Fellows of the UK Trade Policy Observatory