Skip to content
Subscriber Only

The World’s First Carbon Border Tariff, Explained

The European Union is leveling the playing field with a carbon border adjustment mechanism. We break down the complexity.

relates to The World’s First Carbon Border Tariff, Explained

Illustrations: Nichole Shinn for Bloomberg Green

The European Union’s Green Deal—a set of policies aimed at remaking the bloc’s economy to reach net-zero emissions by 2050—is arguably the most ambitious government plan ever put forward to tackle climate change. But being first comes at a cost.

At least initially, goods produced in the EU will be more expensive than those not subject to emissions-reducing regulations, making local businesses less competitive against their global rivals. To keep companies from fleeing the bloc, EU policymakers are devising a way to penalize imports of carbon-intensive goods. Few details have been released yet (though even those have generated plenty of Sturm und Drang), but in general, here’s how to understand the basic idea behind the plan: