Thread by @PIIE

THREAD: @jfkirkegaard outlines the three political and economic implications a higher carbon tax has for the European Union... (1/7)

1/A carbon border adjustment tax is inevitable—an EU carbon tax puts EU businesses at a disadvantage vs. imports. An adjustment tax would effectively set tariffs on imports from economies without equivalent carbon prices, which could stir confrontation with the US & others. (2/7)

2/Carbon revenues will change the distribution of EU revenue generation & disbursements. Shifting away from carbon fuels means some government revenue will disappear, so governments will have to retain at least some of the new carbon revenue... (3/7)

...But some carbon tax revenue should also be earmarked by the EU for projects mitigating the effects of climate change. (4/7)

3/A high carbon price will render part of the EU’s capital stock obsolete. Shifting away from fossil fuels will destroy certain infrastructure & businesses, creating groups of economic "losers" who will need to be compensated through the carbon derived revenue... (5/7)

...This would be a perfect time to finance a significant investment-led EU economic growth plan. A high and comprehensive carbon price will create new incentives for private businesses to invest and provide a powerful new economic stimulus to European growth. (6/7)

Read @jfkirkegaard's full piece on why the EU needs a much higher carbon tax, what it would look like, and what it means for the region. (7/7)
piie.com/blogs/realtime…