EUROPEAN UNION CARBON TAX

The document is a teaching guide designed to simulate negotiations over a proposed European Union carbon tax. It combines negotiation theory—drawing on works by Raiffa, Bazerman, Neale, Fisher, and Ury—with a technical game-theory model to show how cooperation can lead to mutually beneficial outcomes. The guide discusses the challenges of unilateral climate policy, specifically the risk of 'leakage' where emissions shift outside the EU, and the potential for carbon tax revenues to be used for fiscal reform to reduce unemployment.

• The European Union and its Member States expressed a willingness in October 1990 to stabilize total CO2 emissions at 1990 levels by the year 2000, which would have required a 12% reduction in emissions based on European Commission estimates.
• A primary obstacle to the adoption of a carbon tax in the EU is the fear that it would lead to a loss of competitiveness, creating an incentive for individual countries to 'free-ride' by avoiding the tax to maintain lower fossil fuel energy costs.
• Unilateral carbon policies in Europe may lead to 'leakage,' where emissions increase outside the EU because production shifts to countries without the tax or because lower global demand for fossil fuels reduces their international price.
• The simulation exercise utilizes a technical 'core' of outcomes where the sum of payoffs is 1,436, and no coalition would want to withdraw because each party receives at least as much as they would by not cooperating.

APA

Barrett, S. (1994). EUROPEAN UNION CARBON TAX. World Resources Institute. https://pdf.wri.org/bell/case_1-56973-144-6_full_version_english.pdf

Chicago

Barrett, Scott. EUROPEAN UNION CARBON TAX. World Resources Institute, 1994. https://pdf.wri.org/bell/case_1-56973-144-6_full_version_english.pdf.

Wikipedia

{{cite report |last1=Barrett |first1=Scott |title=EUROPEAN UNION CARBON TAX |publisher=World Resources Institute |date=1994 |url=https://pdf.wri.org/bell/case_1-56973-144-6_full_version_english.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{barrett1994european, author = {Barrett, Scott}, title = {{EUROPEAN UNION CARBON TAX}}, institution = {World Resources Institute}, year = {1994}, url = {https://pdf.wri.org/bell/case_1-56973-144-6_full_version_english.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }