 The Economics of Border Carbon Adjustment: Rationale and Impacts of Compensating for Carbon at the BorderLionel Fontagné and Katheline Schubert Post-Print from HAL Abstract: International trade contributes directly to global greenhouse gas emissions, as the carbon content of high-emission products is priced differently in different countries. This phenomenon is termed carbon leakage. Thus, not putting a price on carbon is theoretically equivalent to an export subsidy, although that would be difficult to challenge in the context of multilateral trade law. Leakage can be alleviated by pricing the carbon embedded in imported products through a border carbon adjustment (BCA), be it a tax, a carbon tariff, or a regulation requiring the purchase of emissions allowances. The design of a BCA is a compromise between environmental effectiveness in preventing leakage, economic effectiveness in preserving competitiveness and ensuring acceptability, technical feasibility of the implementation, and World Trade Organization compatibility. An import-limited BCA is more effective than free emissions allowances in reducing leakage, but it does not preserve the export competitiveness of the country imposing it. Date: 2023-08 Published in Annual Review of Economics, 2023, 15 (1), ⟨10.1146/annurev-economics-082322-034040⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04157547 DOI: 10.1146/annurev-economics-082322-034040 Access Statistics for this paper More papers in Post-Print from HAL |
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