Yellen says the U.S. Treasury says carbon prices could work, according to notes from Reuters

BRUSSELS (Reuters) – US Treasury Secretary Janet Yellen acknowledged on Tuesday the use of carbon pricing schemes, such as the new European border tax, but stressed that moves should be taken into account in other ways to reduce emissions.

Yellen was in Brussels a day before the European Union unveiled a major package of measures to tackle climate change.

Among them, he will explain what the carbon limit adjustment mechanism (CBAM) is, designed to reduce emissions by creating financial incentives for greener production and avoiding “carbon emissions” as operations are known to transfer to countries with lower emission reductions.

“Carbon tax or carbon price cap and trade is a very effective way to deal with emission reductions, but there is nothing that requires countries to continue to do so,” he told Reuters in an interview.

“And it’s very important to think about how a country fits its carbon limit, how it should treat countries that have achieved environmentally friendly production techniques, but in different ways,” he added.

He acknowledged that countries that wanted to reduce their emissions had the right to tackle possible carbon emissions.

“I think that’s an important principle, and when it gets to that point it would apply in the United States, and certainly in the European Union and other countries,” he said.

Yellen, in a special note to reporters in Brussels, said a carbon limit adjustment mechanism would ensure that efforts to reduce carbon emissions in some countries would not lead to high-emission activities in other countries with lower standards.

But he said there is widespread recognition that more work needs to be done to integrate these mechanisms globally.

“The reason for wanting to be is clear,” he said. “But we really have work to do to think about how these regimes should be interactive.”

The EU package, which will be introduced on Wednesday, is part of efforts to reduce net greenhouse gas emissions by 55% by 1990 levels from 1990 levels.

The European Commission has said its plan will be compatible with World Trade Organization rules and fairness, so that importers of goods such as steel can buy emission certificates at the same price as domestic producers. But it has raised concerns in many countries.