April 28, 2021

Anna Murray 

To face the severe climate change, the European Union plans to start a carbon border tax toward the imported goods from outside Europe. 

In Europe, companies need to buy certificates for carbon emissions from production, leading to higher prices. However in other countries, including the U.S., emission regulations are not well followed. Therefore imported prices from those countries are more competitive and this is called “carbon leakage.” This also happens when some European companies move to another region. Their costs are saved, but the emission affects the whole Earth.

Currently studies show that one fourth of climate change revenue is reduced due to those transferred companies. As one of the solutions, carbon border taxes have possibility to reduce the leakage rate, even decrease carbon emission by 5%.

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