EU as a single region and we assume that it has a domestic carbon tax of 20 euro/tonCO2 applied to all sectors. This tax level was in fact the tax rate proposed, but not approved, for non-emission trade sectors by the mission to reform the European Energy Tax Directive (mission, 2011; hi et al., 2014). As the literature suggests, we also assume that the EU exempt their exports from the domestic carbon taxation to avoid petitive disadvantage of domestic firms in the world market (Holzer, 2010). Likewise we presume that non-EU countries are not implementing any emissions reduction policy or, if they do, they exempt their exports from it. Then, in order to ‘level the carbon field’ we simulate a hypothetical CBT that the EU would apply on products imported from non-EU countries. Tariffs puted
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