With the entry into force of the Paris Agreement, climate cooperation has broadened and heterogeneity of domestic action has become an accepted feature. This means efforts remain asymmetrical across countries, raising concern about emissions leakage and competitiveness impacts.
Border carbon adjustments (BCAs) could be an answer, as they can level the competitive playing field, reduce emissions leakage, and incentivise trade partners to strengthen their own climate efforts. Economic modelling studies suggest that the effectiveness of BCAs in tackling leakage may vary from moderate to very high.
This brief summarises the draft key messages of the larger report on designing border carbon adjustments for climate protection, to be published later this year.
This work is part of the Climate Strategies project, “Making the International Trading System Work for Climate Change”, funded by the KR Foundation.
Type: Policy briefs