Climate action in the making: business and civil society views on the world’s first carbon border levy

Abstract

Carbon border levies have been suggested as an important tool for ramping up climate action. Such a levy is being negotiated as part of the EU’s Green Deal, with input from public consultations. The success of the EU’s carbon border adjustment mechanism (CBAM) will depend on its design and acceptance. While most analyses focus on resistance from the EU’s major external trade partners, this article analyses the views of non-state actors within the EU. Their views will be decisive for the cohesion and determination of the EU as the CBAM proposal encounters external resistance. Examining the views of European business and civil society organizations expressed by 276 respondents in the EU’s public consultation, we show that there is general support for CBAM but divergent views on its purpose and on what to do about the allocation of free allowances in the EU Emissions Trading System, sectoral coverage, exemptions for third countries, export rebates and emissions scope. The success and strength of CBAM will depend on whether the EU is able to resolve these design issues and reach compromises between the opposing views of business and civil society. Graphical Abstract

Making the UNFCCC fit for purpose: A research agenda on vested interests and green spiralling

“…As the climate crisis heats up and countries increasingly turn to additional governance arrangements, such as carbon border adjustment mechanisms and the G7 climate club (Buylova et al., 2022; Nasiritousi & Reischl, 2022), multilateral fora such as the UNFCCC will remain key for maintaining legitimacy in global climate governance (Buylova et al., 2023; Tallberg et al., 2023). While the UNFCCC cannot on its own resolve all issues required for rapid climate transformation, it remains the only universal forum where crucial political climate discussions can be held.…”

German stakeholder perceptions of an EU carbon border adjustment mechanism

“…They report that 74% of respondents agreed or strongly agreed that border carbon adjustments are becoming increasingly necessary to address carbon leakage. Buylova et al (2022) studied data from the EU`s public consultation on CBAM (of 2020), elicited views from companies and Table 1. Selection of design elements and options considered in our survey.…”

Distributional consequences shape public support for the EU carbon border adjustment mechanism: evidence from four European countries

“…Despite these allegations, legal scholarship emphasizes that border adjustments are consistent with existing World Trade Organization (WTO) jurisprudence on policy-justified trade measures and do not, by design, violate non-discrimination provisions in trade agreements [15,16]. Apart from legal considerations, structural differences across carbon-intensive, trade-exposed sectors [17][18][19] as well as international economic and geopolitical challenges resulting from the introduction of a carbon border tax [20,21] will determine the political feasibility of the CBAM policy. As with other climate policies, the domestic political economy shapes policy support more broadly [22][23][24][25] and support for the CBAM specifically [17,19,[26][27][28].…”

“…Apart from legal considerations, structural differences across carbon-intensive, trade-exposed sectors [17][18][19] as well as international economic and geopolitical challenges resulting from the introduction of a carbon border tax [20,21] will determine the political feasibility of the CBAM policy. As with other climate policies, the domestic political economy shapes policy support more broadly [22][23][24][25] and support for the CBAM specifically [17,19,[26][27][28]. This is not least reflected in 'relatively undivided reservations' [26,27] from domestic producers in the EU, especially those with high electricity demand and complex supply chains [17], as well as exporters that are concerned about their loss in competitiveness from the phase-out of free permits in EU carbon markets [18].…”