Search

Begin New Search Topic Climate Change Content Type Policy Brief Publishing Institution Peterson Institute for International Economics Publication Year within 3 Years

1. EU carbon border adjustment mechanism faces many challenges

Author:
Gary Clyde Hufbauer, Jeffrey J. Schott, Megan Hogan, and Jisun Kim
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
This Policy Brief assesses the evolving EU Emissions Trading System and EU carbon border adjustment mechanism (CBAM) and explains objections within Europe and from major trading countries likely to be affected by the proposed CBAM import levies. While EU officials have sought to ensure that the CBAM is consistent with obligations under the World Trade Organization (WTO), key aspects of the CBAM could violate WTO rules and are likely to be contested, taking years to play out. Meanwhile, several other countries will adopt new carbon-inspired border restrictions, adding to global trade frictions. Major carbon-emitting countries, therefore, need to act cooperatively instead of unilaterally to both advance the fight against climate change and update the rules-based global trading system. Two-thirds of greenhouse gas emissions result from nontraded activities, such as road transport, electricity generation, and home and office heating. Countries can curb emissions in these activities, while developing guidelines for carbon abatement in traded sectors.
Topic:
Climate Change, Economics, International Trade and Finance, World Trade Organization, European Union, and Carbon Emissions
Political Geography:
Europe

2. Corruption risks loom large over financing of green infrastructure

Author:
Creon Butler, Sean Hagan, and Dominic Martin
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Governments and public international organizations are making a concerted effort to provide large amounts of money to reduce emissions of greenhouse gases (climate mitigation) or adapt to the effects of climate change (climate adaptation). But there is a significant risk that the infrastructure projects where much of this climate financing will need to be targeted will be undermined by corruption—from bribery and kickbacks to fraud and embezzlement. The threat is increased by the scale of the climate financing being provided and the speed with which the required projects need to be completed. This Policy Brief identifies key corruption risks that threaten climate infrastructure financing and the best practices that can alleviate these risks.
Topic:
Climate Change, Corruption, Infrastructure, Risk, Carbon Emissions, and Green Transition
Political Geography:
Global Focus

3. Climate policy is macroeconomic policy, and the implications will be significant

Author:
Jean Pisani-Ferry
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For all the long-term benefits of urgently addressing climate change, economic policymakers must plan for a challenging transition to carbon neutrality. Pretending that the costs will be trivial is dangerous. Estimates by the Intergovernmental Panel on Climate Change of the United Nations indicate that emergency action is indispensable to limit catastrophic climate disruption. Because of the magnitude of the efforts involved and the pace of the transformation implied, the accelerated transition to a carbon-neutral economy is bound to have serious, immediate economic implications, warns Pisani-Ferry. Some equipment will lose economic value. Some plants will have to close. Employees will have to be reallocated to other occupations. Investment will have to increase, to repair or rebuild infrastructure and the capital stock. He argues that so far policymakers have not addressed these implications in a systematic manner. It is high time policymakers realize that climate policy is also macroeconomic policy and design transition strategies now.
Topic:
Climate Change, Macroeconomics, and Carbon Emissions
Political Geography:
Global Focus

4. Can EU carbon border adjustment measures propel WTO climate talks?

Author:
Gary Clyde Hufbauer, Armen Hovakimian, and Jeffrey J. Schott
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Reforms proposed in the European Union’s “Fit for 55” climate policy package are likely to sharply increase the cost paid by European firms for their greenhouse gas (GHG) emissions. Recognizing that increased carbon prices would put European firms at a disadvantage in competing with imports from countries that produce without incurring these costs, the European Commission has proposed a Carbon Border Adjustment Mechanism (CBAM) requiring that the most carbon-intensive EU imports either incur comparable carbon charges as EU firms or pay the equivalent of a carbon-based tariff. The CBAM aims to deter carbon leakage, which could arise if firms shift carbon-intensive production out of Europe to facilities in countries that do not tax GHG emissions (or tax at a low rate) and then export the goods to Europe. European production and output would suffer and global climate efforts to reduce GHG emissions would be undercut. The loftier goal is to encourage other countries to follow the European example and strengthen their own national decarbonization policies, which in turn would exempt their goods from CBAM charges. The CBAM would cover five carbon-intensive industries: iron and steel, aluminum, fertilizer, electricity, and cement. Countries most affected by the CBAM include Russia, China, Turkey, the United Kingdom, Ukraine, South Korea, and India. Some are likely to contest the policy, claiming that the CBAM is a unilateral measure that violates World Trade Organization rules and bolsters protectionism while hampering rather than encouraging efforts in other countries to tackle climate change. A better and more feasible approach would be adoption of a CBAM moratorium while negotiations are conducted to promote carbon abatement policies that comply with the rules-based global trading system.
Topic:
Climate Change, European Union, Economy, Carbon Emissions, and Imports
Political Geography:
Europe