Design matters: some options (e.g. substituting international credits for domestic pricing) risk weakening incentives and CBAM’s diffusion effects.

Report: climate-club.org/wp-content/u...

#CBAM #CarbonPricing #ClimatePolicy #ClimateTrade

In a recent contribution to the Climate Club’s flagship report, Carolyn Fischer and I examine the core design choices:
– what qualifies as a carbon price
– treatment of rebates, exemptions & free allocation
– indirect price signals
– crediting across heterogeneous systems

More broadly, recognition of foreign carbon pricing has been a major driver of the global diffusion of carbon pricing — but its design is far from straightforward.

A key implementing regulation on this issue is still pending. That regulation (expected soon) will determine CBAM obligations for imports from countries with carbon pricing in place (e.g. China, Korea) or under development (Brazil, India, Türkiye).