EU is now proposing a Boarder Carbon Tax. What is it and how would it work?

A new attempt to tackle climate changes has been taken by European Union: a carbon tariffs on imports of goods coming from countries which are not taken similar aggressive measures to reduce the greenhouse gas emissions.

Carbon border taxes are not new, in fact those measures are being debated for years, and the intentions are to solve a basic problem. If a country imposes policies to cut emissions domestically, it runs the risk that, for instance, some products "high intensive carbon emitters", like steel and cement factories, will certainly face higher costs and thus be less competitive compared to foreign competitors from countries with looser environmental rules. And as an inevitable result of this, steel and cement production will be shifted overseas and will put the gas emissions efforts at risk.

In theory, a carbon border tax could help prevent that situation. If factories all over the world that wanted to sell their products (steel, cement, aluminum, fertilizer, etc.) to the E.U. had to pay a surcharge for the pollution they emit, they would have incentive to clean up their act too. Companies within Europe would have less incentive to shift operations overseas. And, if other countries adopted similar rules, that could put pressure on nations that are reluctant to curb their use of fossil fuels.

Obviously there are pressures against this proposal, coming mainly from countries like China and Russia, notorious and important trading partners of the European Community.

These "winds of change" are also sweeping across the United States, with similar proposals being presented and debated in the US parliament.

The practical effects of this proposal are still uncertain to promote global cooperation to reduce emissions, however with a formal, robust and detailed proposal like the one presented, discussions from now on will certainly be taken more seriously.

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