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Policy Brief

The EU’s Carbon Border Tax is Likely to do More Harm than Good
June 30, 2021

The EU's proposed carbon border tax is well intentioned. It is motivated by climate concerns, not by protectionism. However, the tax is based on the false premise of carbon leakage, and its implementation is rife with practical difficulties. Moreover, the tax, as proposed, departs from the Paris agreement principle of differentiated responsibilities, and will be challenged by developing countries. The United States is not ready to adopt carbon taxes, either. The WTO, already in a fragile state, may be dealt another body blow by the proposed tax. Better alternatives are available.


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