Framework Proposal for a US Upstream Greenhouse Gas Tax with WTO-Compliant Border Adjustments

Ambitious US climate policy will require border adjustments to protect energy-intensive, trade-exposed industries from unfair competition—but formulating policies compatible with obligations under the World Trade Organization has proved challenging.



March 15, 2018


Brian Flannery, Jennifer Hillman, Jan Mares, and Matthew Porterfield



Reading time

1 minute

Key findings

  • This report describes how to design border adjustments (rebates for exports and a charge on imports) that are compatible with rules under the World Trade Organization.
  • The framework is based on an upstream GHG tax on oil, gas and coal, and process emissions from energy intensive, trade-exposed industries.
  • The approach uses existing, objective methods to measure GHG emissions from facilities but extends them in two ways: to include emissions from products of suppliers, and to allocate emissions to the entire slate of products manufactured by a facility.
  • For nations that adopt it, the framework fundamentally shifts the focus of efforts to mitigate emissions connected to international trade from a system based on where goods are produced to one based on where they are consumed.


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