Border Carbon Adjustment and International Trade: A Literature Review

Madison Condon and Ada Ignaciuk
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Madison Condon: Fletcher School of Law and Diplomacy
Ada Ignaciuk: OECD

No 2013/6, OECD Trade and Environment Working Papers from OECD Publishing

Abstract: An important source of political opposition to measures aimed at reducing emissions of greenhouse gases (GHGs) arises from concerns over their negative effects on the competitiveness of domestic firms, especially those that are energy-intensive and exposed to competition from foreign producers. Politicians and industry representatives alike fear that imports from countries without similar regulations can gain cost-of-production advantages over domestic goods. With many of the major economies of the world contemplating unilateral action to restrict their carbon emissions (while continuing to pursue co-ordinated multilateral action), the parallel concern of carbon leakage — whereby domestic reductions in emissions are partially or wholly counterbalanced by increased emissions elsewhere in the world — has also arisen. Various adjustments have been proposed, both in the academic literature and in draft climate legislation, including levying a border tax or requiring importers to surrender a quantity of carbon permits. Collectively, these kinds of adjustments are often referred to as border carbon adjustments, or BCAs. This note reviews the existing literature on BCAs and alternatives to BCAs and discusses what various researchers have concluded about the efficacy of BCAs from both a trade and an environmental perspective.

Keywords: border carbon adjustment; border tax adjustment; climate change; trade and environment (search for similar items in EconPapers)
JEL-codes: F13 F18 F53 F59 F64 H23 K32 K33 Q48 Q54 Q58 (search for similar items in EconPapers)
Date: 2013-10-31
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (22)

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