Regulation - 22 Jan 2020

Should the EU tax imported CO2?

An EU carbon border tax would be tricky to design, costly to implement and sure to provoke legal challenges. But if done properly there are reasons to think it could succeed.

Climate change is central to the agenda of the new European Commission. Yet many member-states fear that action on climate change will undermine their economic competitiveness and lead to carbon-intensive economic activity moving from the EU to more accommodating jurisdictions. 

One solution the Commission is considering is to tax imported CO2 – with proposed trade commissioner Phil Hogan tasked with designing and introducing a so-called carbon border tax. Such a tax would be levied on imported goods at a rate commensurate with the amount of CO2 emitted in their production.