![]() But that approach is becoming increasingly expensive as the carbon price rises, with a recent trading range of 70 to 100 euros per metric ton. To date, the EU has avoided carbon leakage by compensating domestic producers of certain industrial products with free emissions allowances. This phenomenon, referred to as “carbon leakage,” can result in even dirtier industrial production. However, if only European industries have to pay this carbon price, the EU risks domestic production’s losing out to imports from countries with weaker regulations on emissions. The system requires large European factories and other greenhouse gas emitters to purchase allowances for each ton of carbon dioxide they release. The carbon border adjustment mechanism, or CBAM, is tied to the EU’s flagship climate policy, its emission trading system. quest to create climate clubs will not get off the ground. Without creative compromises and skillful diplomacy, the EU may find that its tariffs lead to reprisals rather than reciprocal action, and the U.S. Without multinational coalitions, dirtier, lower-cost competition will undercut emerging low-carbon technologies.Ī strong transatlantic partnership is a prerequisite to greening the global economy. proposals reflect starkly different and arguably incompatible visions for the intersection of climate and trade policies.Ī failure to align approaches risks further stoking trade tensions and would likely have international repercussions. The Biden administration, meanwhile, proposed a “ green steel club” of nations that would cooperate on reducing emissions by levying tariffs on relatively high-emission imports.Īt first glance, the two approaches might seem similar. It will put carbon-based tariffs on steel, aluminum and other industrial imports that aren’t regulated by comparable climate policies in their home countries. In December 2022, the EU reached a provisional agreement on a carbon border adjustment mechanism. and EU also now have competing carbon tariff proposals, and these could end up undermining each other. ![]() The EU recently announced plans for its own domestic-only clean technology subsidies in response. ![]() The two have clashed over the 2022 Inflation Reduction Act’s requirements that products be made in America to receive certain U.S. and the European Union, two of the most important global leaders when it comes to climate policy, could undermine key climate initiatives of both governments and make it harder for the world to put the brakes on climate change. ![]() (THE CONVERSATION) Rising trade tensions between the U.S. ![]()
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