Carbon Pricing, Carbon Leakage and Border Carbon Adjustment A European Union Border Carbon Adjustment: Which EU member states would be the most and the least impacted by its implementation?

Unilateral policy measures, such as the EU ETS and national carbon taxes are currently applied to tackle climate change. They are pricing carbon emissions from industrial production and related processes. Consequently, to avoid high production costs and to stay competitive in the global economy, industries are relocating their production to countries with laxer emission constraints. This phenomenon is known as carbon leakage. A potential solution for this phenomenon is a Border Carbon Adjustment that would ensure that companies can compete on a level playing field. This thesis uses data from the statistical office of the European Union, Eurostat, to estimate, which EU member states would be the most and the least impacted by the implementation of a European Union Border Carbon Adjustment. The embodiment of carbon on EU member countries’ imports is evaluated, to assess the impact of such a measure. The estimates suggest that Greece and Czechia would be the most and the least impacted, respectively. The embodiment of carbon in Greece’s imports from non-European countries reveals to be relatively high, compared to the country’s total imports. At the same time, carbon-embodied imports represent a small fraction of the Czech Republique’s total imports. Some of the Greece’s top imports are classified among high polluting NACE Rev.2 sectors, such as the sector of “manufacture of coke and refined petroleum”. Czechia top imported goods are classified among less polluting sectors.