Yellen urges better coordination on carbon policy
VENICE: US Treasury Secretary Janet Yellen called on Friday for better international coordination on carbon-cutting policies to avoid trade frictions, days before the European Union is due to unveil a controversial carbon border tax.
The EU’S carbon border adjustment mechanism (CBAM) would impose levies on the carbon content of imported goods in an effort to discourage “carbon leakage”, the transfer of production to countries with less onerous emission restrictions.
Speaking as G20 finance ministers met in Venice, Yellen said there were multiple paths to achieve the emissions cuts needed to tackle climate change besides explicit carbon-pricing.
“It’s important that any carbon border adjustment system focus on the degree to which a country’s climate policies reduce emissions, and hence carbon content, rather than focus only on explicit carbon pricing,” Yellen told a climate tax forum.
“Recognising the different paths countries are taking to address climate change could help avoid policy measures to address carbon leakage that inadvertently create new international risks and spillovers,” she added.
Yellen said countries in the club of G20 large economies would need to make significant public and private investments and take “difficult economic decisions” to achieve the goals of decarbonising their economies by mid-century.
Approaches could include regulatory restrictions and emissions standards, direct public investments, public subsidies to incentivise private investments, and carbon markets.