In contrast, climate policy cooperation – in terms of a multilaterally coordinated CO2 pricing scheme with a common border adjustment – achieves the greatest global emission reductions and creates welfare gains by avoiding future climate costs.
A joint climate club of the EU with the USA, the United Kingdom, Canada and Japan reduces global emissions by 14.8 percent, which corresponds to an annual reduction in CO2 emissions of 5.46 billion tonnes.
In addition to the reformed EU Emissions Trading System, the EU carbon border adjustment is a key component for balancing international differences in climate ambitions and in the pricing of CO2 emissions and for achieving a climate-neutral EU by 2050. With this instrument, the EU aims to ensure the competitiveness of European producers despite stricter EU climate targets and rising CO2 costs and to reduce the risk of carbon leakage, i.e., the relocation of emissions to countries with less stringent emissions regulations.
