A proposal to refocus the EU Carbon Border Adjustment Mechanism on preventing carbon leakage

Negotiations over phasing out fossil fuels at the COP28 climate summit highlighted how difficult it is for the international community to coordinate climate policies. This column argues that the EU’s Carbon Border Adjustment Mechanism constitutes an important step forward from current anti-leakage policies, but only if it can prevent evasion and impose no unnecessary economic harm on Europe’s trading partners. The authors propose a Leakage Border Adjustment Mechanism – a non-discriminatory, product-specific tariff on imports designed to exactly offset leakage while keeping administrative burdens to a minimum.

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