Full Title: Addressing the Leakage and Competitiveness Risks of Climate Policy
Author(s): Joseph E. Aldy
Publisher(s): Resources for the Future
Publication Date: October 5, 2021
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This issue brief introduces key policy principles to mitigate the risks involved in implementing ambitious climate goals on the federal level.
Over the past year, governments across the world have called for more ambitious goals to combat climate change. The European Union, Japan, the United Kingdom, and many other countries have pledged net-zero emission goals by mid-century, with China aiming to do so by 2060. In April, the Biden Administration pledged to cut its emissions in half by 2030 as part of a broader set of aims that includes a carbon-free power sector by 2035 and net-zero emissions economy-wide by 2050.
At the same time, a number of governments have raised concerns about how ambitious domestic mitigation policies may impose adverse competitiveness pressures on domestic energy-intensive industries that in turn result in emissions leakage. To address such risks, policymakers have turned their attention to carbon border adjustments, a surcharge on imports from countries that do not have comparable climate policies.