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Sustainability-oriented Future EU Funding: A European border carbon adjustment
Austrian Institute of Economic Research (WIFO). (FairTax)
Austrian Institute of Economic Research (WIFO). (FairTax)
Austrian Institute of Economic Research (WIFO). (FairTax)
2018 (English)Report (Refereed)
Abstract [en]

The need to reform EU funding and recent political developments such as Brexit and the withdrawal from the United States from the 2015 Paris climate agreement could revitalize the debate about the introduction of border carbon adjustments (BCA) for the European emission trading system (ETS). The introduction of a BCA would allow the EU to phase out current carbon leakage provisions of the ETS and to auction off all emission allowances, thus rendering the ETS a more effective unilateral tool to price and reduce carbon emissions. By using a dynamic new Keynesian (DYNK) model, we estimate that a BCA for the ETS would generate substantial and stable revenues. Given different assumptions about the development of the carbon intensity of non-EU production and different BCA designs we find that estimated revenues would suffice to finance between a third and all of current EU expenditures by the year 2027, thus allowing Member States to reduce their current contributions to the EU budget accordingly. Administered at the EU borders a BCA would represent a sustainability-oriented instrument to finance the EU allowing EU Member States to cut more distortionary taxes such as those on labour, thereby increasing growth- and employment-friendliness of taxation. The proposed measure could thus contribute to tackle both environmental and fiscal challenges currently facing the EU.

Place, publisher, year, edition, pages
Umeå: Umeå universitet , 2018. , p. 31
Series
FairTax: Working Paper Series ; 15
Keywords [en]
EU budget, sustainability-oriented taxation, border carbon adjustment, EU revenue system, carbon pricing
National Category
Law and Society
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-144235OAI: oai:DiVA.org:umu-144235DiVA, id: diva2:1178081
Funder
EU, Horizon 2020, 649439Available from: 2018-01-28 Created: 2018-01-28 Last updated: 2018-01-29Bibliographically approved

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CiteExportLink to record
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