WASHINGTON, DC—What is perhaps the most effective step that can be taken by jurisdictions worldwide wishing to address climate change? Economists have long advocated carbon pricing. However, policymakers are often reluctant to implement strong carbon pricing for fear of disadvantaging domestic industries or offshoring emissions-intensive activities. And developing a workable overall strategy in this complex challenge has proven difficult.
Today, a new study has been published by the Oxford University Press Review of Environmental Economics and Policy that addresses this issue directly by presenting an in-depth analysis of utilizing a border carbon adjustment, or BCA. A BCA would address “carbon leakage” concerns by using trade measures to ensure that products from foreign producers facing lower or no carbon prices are on equal footing with domestically produced goods.
The study, posted here by Resources for the Future (RFF), is Developing Guidance for Implementing Border Carbon Adjustments: Lessons, Cautions, and Research Needs from the Literature. The authors are Aaron Cosbey, International Institute for Sustainable Development; Susanne Droege, German Institute for International and Security Affairs; Carolyn Fischer, Vrije Universiteit Amsterdam, University of Ottawa, and Resources for the Future; and Clayton Munnings, Munnings Consulting LLC, Berkeley, California, USA.
The authors state that, “Placing carbon pricing at the center of climate policy is widely accepted to be the most cost-effective way to reduce GHG emissions. The effectiveness of carbon pricing, however, can be undermined by international trade: goods, capital, and energy flow across markets that have different climate policies, which can lead to carbon leakage.”
Their article aims to highlight the best practices in the design and implementation of BCA, based on interdisciplinary research to date.
Read the full study posted by RFF, Developing Guidance for Implementing Border Carbon Adjustments: Lessons, Cautions, and Research Needs from the Literature
Or read the study at Oxford Academic: Here.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.