Border carbon adjustments: Addressing emissions embodied in trade

Researchers in Leeds (Marco Sakai and John Barrett) examined the effectiveness of border carbon adjustments (BCAs), which have figured prominently as policy instruments to address competitiveness concerns in countries subject to a carbon price. The authors estimated the volume of emissions that could be potentially taxed by BCAs, and particularly focus on the effects of trade provisions and country and sectoral coverage. Their findings indicate that trade provisions can significantly reduce the scope and effectiveness of BCAs. The principle of best available technology and exclusion of electricity reduce the tariffs considerably. The authors argue that BCAs are not optimal policy tools to address carbon leakage concerns, and consequently alternative options should be sought.

Read the paper here.