Reaping a ‘Triple Dividend’ from a European Carbon Border Tax

The European Green Deal (EGD) aims at turning the EU into climate neutral, circular economy. One of the promising elements of the EGD is the introduction of a carbon border adjustment (CBA) mechanism mentioned as an option in the EGD. The CBA offers the triple advantage of (i) supporting the ecological transformation; (ii) fighting carbon leakage and (iii) providing additional funds for the EU budget that are independent of member states’ direct contributions. To reap this ‘triple dividend’, the CBA needs to be carefully designed both economically and legally as it also needs to be compatible with member states’ WTO obligations.