Potential Impacts and Challenges of Border Carbon Adjustments
This article for Nature Climate Change examines the potential impacts of border carbon adjustments on leakage, competitiveness, and cooperation.
Harmonized carbon pricing across borders is hard to achieve in the real world as carbon leakage can reduce the cost-effectiveness of unilateral approaches to reduce global emissions. To address this problem, border carbon adjustments (BCAs) would apply the domestic carbon price to emissions embodied in traded goods, which levels the playing field for emissions-intensive and trade-exposed industries. Here, we review the potential environmental and economic impact of border carbon adjustments on leakage reduction, competitiveness restoration, cost-effectiveness, equity and cooperation enhancement. We find that the viability of border carbon adjustment schemes can be substantially reduced with the current legal and practical implementation constraints.
Carolyn Fischer is a senior fellow at RFF. Fischer's research explores questions of environmental policy instrument design.
Media Highlight — Jun 16, 2022
E&E News: "Carbon Tariffs Are Coming. Here's How the US Is Preparing"
Senior Fellow Ray Kopp shares his insights about the differences and similarities between the United States and European Union's plans for a border carbon adjustment.
Media Highlight — Jun 6, 2022
E&E News: "Indian State of Gujarat Moves to Launch Carbon Market"
Senior Fellow Maureen Cropper employs her expertise on Indian air pollution and carbon pricing in a story about efforts in the country to launch a carbon market.