Options for EU Trade Policy to Enhance Climate Action: Strategic and Tactical Considerations for Incentivising Low-Carbon Investment and Addressing Carbon Leakage

Monographien/ Sammelwerke extern , 13 S.

Susanne Dröge, Karsten Neuhoff, Christian Egenhofer, Milan Elkerbout

Berlin: SWP, 2019, 13 S.
(SWP Working Papers ; 01)

Abstract

In her Political Guidelines, Commission President-elect Ursula von der Leyen declares cli-mate neutrality to be one of the central objectives of a proposed European Green Deal. EU member states are now discussing whether to formally agree on an objective for climate neutrality in 2050. Some have already set deadlines – Finland as early as 2035. This has triggered reflection on the adequate policy mix, notably with a view to making a business case for low-carbon innovation and investment while addressing carbon leakage. The Commission President-elect thinks this will require a carbon border tax.To address the strategic need for a robust EU framework for low-carbon investment, we discuss that the European Commission could investigate the economic, legal, and adminis-trative viability and implementation timeline of carbon price adjustments at the border, and also could investigate the possibility to extend the EU Emissions Trading System (ETS) to include consumption of carbon intensive materials as well as the potential of product standards to achieve the same aim. All three instruments have different ad-vantages and shortcomings as to political acceptability, effectiveness, or the implication for the World trade system. To facilitate the support for partner countries in advancing climate action, both bilateral and multilateral measures should be prepared.

Karsten Neuhoff

Abteilungsleiter in der Abteilung Klimapolitik