Is a clash coming when trade and climate meet at the border? The impact of the EU's carbon border adjustment on China's belt and road initiative

Jamal Khan, Yuan Li and Eric Girardin ()
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Jamal Khan: Shandong University
Yuan Li: Shandong University

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Abstract: We empirically examine the effectiveness of EU Border carbon adjustment (BCA) in the context of BRI, by developing a hypothetical BCA scheme based on a multi-regional Input-Output model. We use various evaluation criteria such as sectoral coverage, economic condition of trade partners, compliance with trade regulations, and selection of Best Available Technology (BAT). Our analysis shows that the EU-BCA scheme covers 44% of the global traded emissions, of which 84% are generated in the BRI regions. However, the BAT principle and trade provisions reduce the coverage of BCA emissions for BRI regions, while assumptions about the carbon intensity of imports result in a further reduction. Our findings both cast serious doubt on BCA's ability to drive industrial decarbonisation and alleviate domestic producers' competitiveness concerns, and support the argument that EU-BCA may level the playing field for the EU's domestic market but may not address competitiveness concerns in other (non-EU) markets.

Keywords: International trade; Climate policy; Belt and road initiative (BRI); Border carbon adjustment (BCA); Multi-regional input-output (MRIO) (search for similar items in EconPapers)
Date: 2022-12
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Published in Structural Change and Economic Dynamics, 2022, 2022-09-23, 63, pp.112-124. ⟨10.1016/j.strueco.2022.09.012⟩

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Journal Article: Is a clash coming when trade and climate meet at the border? The impact of the EU's carbon border adjustment on China's belt and road initiative (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03821161

DOI: 10.1016/j.strueco.2022.09.012

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