ANALYSIS: Effects of the Border Tax Adjustment in EU until 2030

We are pleased to present the results of our new analysis prepared as part of the LIFE Climate CAKE PL project entitled The effects of the implementation of the Border Tax Adjustment in the context of more stringent EU climate policy until 2030”

 

 

 

In relation to the plan to raise the EU GHG emission reduction targets by 2030 to 50-55% compared with the 1990 level and also to attain climate neutrality by 2050, consideration should be given to the implementation of new measures to protect sectors against loss of competitiveness and carbon leakage.

 

The analysis used the GHG55 scenario assuming that the GHG emission reduction target will grow to 55% in 2030 compared with the 1990 level and the BTA (border tax adjustment) scenario assuming the implementation of a GHG emissions-related border tax adjustment for products imported into the EU. The border tax adjustment covers the imports into the EU from the EU ETS sectors. The implementation of the border tax adjustment would cause an increase in the prices of products imported from the countries outside the EU in the sectors covered by the adjustment and, at the same time, a decline in the value of imports.

 

The analysis was prepared as part of the LIFE Climate CAKE PL project, the CGE model, which enables the assessment of the effects of implementing such a mechanism on the economies of EU countries

 

Below are the most important conclusions from the analysis:

 

  • An increase in the prices of imports into the EU – according to the projection, the prices of imported goods in the sectors covered by the border tax adjustment would be higher by about 1,6% on average in 2030.
  • A change in the value of imports – an increase in the prices of imported goods to the EU would cause a change in the value of imports by about -3.4% in the sectors covered by the border tax adjustment. The changes in imports to the EU would be the largest in the sector of ferrous metals, by -11.6%. Although imports would grow in some of the sectors which are not covered by the border tax adjustment (e.g. manufacturing); however, in overall terms, the total change in imports into the EU from the other regions of the world would be about – 0.5% and it will be fairly differentiated among EU Member States (about -1.2% for Poland).
  • An increase in the prices of products exported from the EU and a decline in the value of exports – as the result of an increase in the prices of goods manufactured in the EU, the prices of goods exported from the EU to the other regions of the world will grow. The prices of export goods in the sectors covered by the border tax adjustment would grow by about 2%. The increase would be the largest in the sector of ferrous metals, by 0.4%. The value of exports from the EU in the sectors covered by the border tax adjustment would be -1.1%. When taking all the sectors into account, the average change in exports to the regions outside the EU would be about -0.7% and it would be the largest in Bulgaria, -1.3%, and the Baltic States, -1.2% bout -1% for Poland).
  • An increase in the value of the output in the EU – the introduction of the border tax adjustment would cause an increase in the output in the sectors covered by that adjustment by 0,4%. An exception would be sector of ferrous metals in Bulgaria and the Baltic States, where the output would noticeably change by about -2%.
  • A slight impact of the border tax adjustment on the value of the GDP – in EU Member States (with changes close to 0%), since the increase in the value of the output would be offset by the decline in the output in the other sectors. The household consumption in the EU would slightly grow by about 0.1% in relation to the improved terms of international trade.
  • A reduction in the global GHG emissions – the introduction of the border tax adjustment in the EU would cause a reduction in the global GHG emissions by about 24 Mt CO2 eq. The largest percentage change would occur in the region of Ukraine, Belarus and Moldova (by about -1%), due to the proximity of these states to the EU. Moreover, according to the projection, the additional effort to be taken in 2030 in the EU by all the sectors covered by the EU ETS (after the GHG emission reduction target has been raised to 55%) will amount to about 200 Mt CO2
  • The revenues to the budget – the implementation of the border tax adjustment within the EU would bring in 2030 additional revenues estimated at about EUR 7.61 billion (USD 10.6 billion) in constant 2011 prices. These resources can be used, among others, to mitigate the effects of the transition in the states which are affected to the greatest extent by EU climate policy.

 

Analysis in english language:

  The effects of the implementation of the Border Tax Adjustment in the context of more stringent EU climate policy until 2030 (2.0 MiB, 147 hits)

 

Analysis in polish language:

  Skutki wprowadzenia podatku granicznego od emisji GHG w warunkach zaostrzania polityki klimatycznej UE do 2030 r. (1.4 MiB, 166 hits)

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