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Deutsches Institut für Wirtschaftsforschung

DIW Berlin

Das DIW Berlin - Deutsches Institut für Wirtschaftsforschung ist eines der größten Wirtschaftsforschungsinstitute in Deutschland.

Lobbying Activity

Meeting with Antoine Colombani (Cabinet of Executive Vice-President Frans Timmermans)

16 Jun 2021 · Carbon Border Adjustment Mechanism

Response to Carbon Border Adjustment Mechanism

23 Mar 2020

Various design options might be considered for carbon border adjustment mechanism to enhance the effectiveness of carbon pricing for the transition to climate neutrality. As a group of academics with an interdisciplinary background, including law and economics, we have analysed three main models that could lead to the introduction of a carbon border adjustment mechanism or alternative measures. These three models help to highlight the main differences between the available options for the EU: • Under the first model, importers of basic materials would be required to surrender carbon allowances at the level of a product benchmark or, where lower, at the verified level of foreign carbon intensity. In parallel, allocation of free allowances would be phased out. • Under the second model, a symmetric adjustment mechanism for exports and imports would be adopted, including refund to exporters for the carbon costs incurred on basic materials embodied in products. • Under the third model, the EU ETS would be complemented with a “climate contribution” on materials sold in the European Union (EU) at the product benchmark level related to the carbon intensity of each material. The free allowance allocation regime would then be modified to be directly linked to the volume of material production at the product benchmark level. We evaluate, for each of these three models, their (i) legality under EU, WTO and international law, (ii) coherence with EU climate objectives, (iii) effectiveness in carbon leakage prevention, (iv) potential international implications, as well as their (v) administrative complexity and compliance costs. On that basis, we conclude that the third model scores the highest on these evaluation factors. We encourage the Commission to consider our analysis when developing the proposal for a carbon border adjustment mechanism at the EU level. Karsten Neuhoff, Roland Ismer, Alice Pirlot
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Meeting with Günther Oettinger (Commissioner)

3 Jun 2019 · Economic situation/MFF