The Best Way to Tax Carbon at the Border

The Best Way to Tax Carbon at the Border

European Union officials this summer set in motion plans for the world’s first carbon border tariff. A 12-page study published last week by Resources for the Future, a nonprofit research organization based in Washington, offered a road map for how U.S. officials might craft a border tax without relying on an internal market for carbon emissions. Resources for the Future suggested an exemption for imported emissions that are comparable to the emissions in a given sector in the United States. That provides a better incentive for countries to do what the United States is doing and charges them effectively what producers in the United States are paying. “Thinking about real world climate polices and the intersection with trade is a lot more complicated than the stylized world where everybody has a carbon tax,” said Pizer.

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