The president-elect of the European Commission, Ursula von der Leyen, and Frans Timmermans, soon to be the new climate chief, have both spoken in favour of introducing a carbon tax on the EU’s borders in order to level the playing field for European businesses and also to encourage other regions to take stronger action on climate change.

Timmermans spoke of the leverage the EU has as the world’s largest single market:

We can set global standards. We should use that leverage as best we can, combined with convincing arguments to show that at the end of the day, we can all be better off.

A carbon border tax would mean the EU would apply its carbon price not just to European producers, but also to imports if those imports are coming from a region that does not price carbon.

A carbon border tax, aka border adjustments, has long been proposed by Citizens’ Climate Lobby. This page outlines the policy from a US perspective:

This border adjustment prevents the carbon fee from putting American businesses at a competitive disadvantage in global markets.  It will also remove the incentive for them to relocate overseas to avoid the carbon fee. In addition, it will encourage foreign countries to adopt their own carbon fee so they would get the money instead of us.