Spend, transfer, or repay. What to do with all the money from the EU carbon border tax?

Client/Funding Institution

Anniversary Fund of the Oesterreichische Nationalbank

Abstract

The project addresses the expenditure side of the European carbon border adjustment (CBA) mechanism. Currently, there are intensive discussions concerning the design of the CBA mechanism. The use of revenue is a sensitive issue that can have far-reaching implications on the effectiveness and legality of the CBA. While different expenditure options have been proposed, there is a lack of research contrasting the economic effects of the said revenue options. Therefore, the priority of the research project is to explore the economic implications of different spending options for the revenues generated by the CBA. It estimates the effects of a carbon border tax on trade, GDP, and welfare for alternative spending scenarios for the carbon border tax revenues. This is explored with two different carbon border adjustment designs. The research will strive to contribute to the policy debate on the design of the CBA, and on the future of the EU budget in the context of new own resources.

Duration

October 2022 - September 2023

wiiw team Leader

Robert Stehrer

wiiw Staff

Birgit Buschbom, Javier Flórez Mendoza, Mario Holzner, Oliver Reiter, David Zenz

Keywords: climate change, carbon border tax, EU budget, structural gravity model, state aid, debt repayment.

Countries covered: EU Member States

Research Areas: International Trade, Competitiveness and FDI


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