The carbon border adjustment mechanism envisioned by the European Commission as part of its landmark Green Deal package is problematic and could lead to trade disputes with other countries, writes Klaus Stratmann in an opinion piece in Handelsblatt.

“The supposed panacea turns out to be problematic upon closer examination,” he writes. As governments from countries like the US and Australia have “a completely different approach to climate”, they might consider a border tax an arbitrary and unjustifiable discrimination, Stratmann points out. Additionally, it would be very difficult to assess the CO₂ footprint of complex products whose parts have been manufactured in several countries, according to CLEW.

As part of the Green Deal, the new European Commission under President Ursula von der Leyen has proposed the introduction of a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage. This could be a carbon tax on imported goods – aligned with the products’ CO₂ emissions. At the same time, EU exporters would be compensated for inner union carbon prices when they send goods outside the bloc.