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Carbon border taxes raise international dispute risks

Tuesday, May 18, 2021


Increasingly demanding climate mitigation targets in some economies have raised concerns over industry competitiveness and possible relocations of carbon-intensive industries. The EU plans a ‘carbon border adjustment mechanism’ (CBAM), effectively a tax, by 2023, to penalise imports from economies without comparable climate policies. These types of measures strengthen industry support for such policies, but risk triggering trade disputes.


  • Efforts to link different emission trading schemes will grow.
  • Decarbonisation policies will change demand patterns for manufacturing inputs.
  • Developing countries’ climate diplomacy will need to be coordinated with their trade ministries.

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