Carbon border tax (micro)

Question 1

What is the aim of a carbon border tax?

Answer 1

Aims to reduce emission by placing a tariff on imports from countries with less stringent policies.

Requires importers to pay a fee for carbon emissions.

Question 2

What does a carbon border tax try to achieve?

Answer 2

A level playing field

for domestic companies against foreign countries with less climate regulations

stops them from gaining a foreign advantage

Question 3

What custom union is developing a carbon border tax mechanism?

Answer 3

The European Union - it is set to be introduced in 2023.

Question 4

What are the 3 arguments for a carbon border tax?

Answer 4

1) Encourages countries with weaker climate policies to take action to reduce their carbon emissions

2) Protects domestic companies - prevents carbon leakage

3) Green tariffs generate revenue for climate action - used to fund climate action, invest in renewable energy and energy efficiency.

Question 5

What are the 3 drawbacks to introducing a carbon border tax?

Answer 5

1) Trade disputes - seen as a form of protectionism - will hamper growth for poorer companies.

2) A carbon border tax would increase the cost of imported goods - lead to higher consumer prices - regressive impact on low income households

3) Simply having a global carbon price - levied on all companies per tonne of CO2 - agreements on this is a long way off.