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Potential impacts and challenges of border carbon adjustments

Author

Listed:
  • Christoph Böhringer

    (Carl von Ossietzky University of Oldenburg)

  • Carolyn Fischer

    (Vrije Universiteit Amsterdam
    University of Ottawa
    Development Research Group, World Bank)

  • Knut Einar Rosendahl

    (Norwegian University of Life Sciences
    Statistics Norway)

  • Thomas Fox Rutherford

    (University of Wisconsin-Madison)

Abstract

Harmonized carbon pricing across borders is hard to achieve in the real world as carbon leakage can reduce the cost-effectiveness of unilateral approaches to reduce global emissions. To address this problem, border carbon adjustments (BCAs) would apply the domestic carbon price to emissions embodied in traded goods, which levels the playing field for emissions-intensive and trade-exposed industries. Here, we review the potential environmental and economic impact of border carbon adjustments on leakage reduction, competitiveness restoration, cost-effectiveness, equity and cooperation enhancement. We find that the viability of border carbon adjustment schemes can be substantially reduced with the current legal and practical implementation constraints.

Suggested Citation

  • Christoph Böhringer & Carolyn Fischer & Knut Einar Rosendahl & Thomas Fox Rutherford, 2022. "Potential impacts and challenges of border carbon adjustments," Nature Climate Change, Nature, vol. 12(1), pages 22-29, January.
  • Handle: RePEc:nat:natcli:v:12:y:2022:i:1:d:10.1038_s41558-021-01250-z
    DOI: 10.1038/s41558-021-01250-z
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    Citations

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    Cited by:

    1. Fuest, Clemens & Meier, Volker, 2023. "Sustainable finance and climate change: Wasteful but a political commitment device?," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    2. Jan Witajewski-Baltvilks & Carolyn Fischer, 2023. "Green Innovation and Economic Growth in a North–South Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(3), pages 615-648, August.
    3. Bellora, Cecilia & Fontagné, Lionel, 2023. "EU in search of a Carbon Border Adjustment Mechanism," Energy Economics, Elsevier, vol. 123(C).
    4. Moritz A. Drupp & Frikk Nesje & Robert C. Schmidt, 2022. "Pricing Carbon," CESifo Working Paper Series 9608, CESifo.
    5. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    6. Carla Guerriero & Antonia Pacelli, 2023. "Emissions Abatement: the Role of EU ETS and Free Allowances. The Italian Case," CSEF Working Papers 698, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Clora, Francesco & Yu, Wusheng & Corong, Erwin, 2023. "Alternative carbon border adjustment mechanisms in the European Union and international responses: Aggregate and within-coalition results," Energy Policy, Elsevier, vol. 174(C).
    8. Alessia Camplomi & Harald Fadinger & Chiara Forlati & Sabine Stillger & Ulrich J. Wagner, 2024. "Designing Effective Carbon Border Adjustment with Minimal Information Requirements. Theory and Empirics," CRC TR 224 Discussion Paper Series crctr224_2024_495v2, University of Bonn and University of Mannheim, Germany.
    9. Y.-H. Henry Chen & Hossein Hosseini Jebeli & Craig Johnston & Sergey Paltsev & Marie-Christine Tremblay, 2023. "An Investigation into the Effects of Border Carbon Adjustments on the Canadian Economy," Staff Working Papers 23-27, Bank of Canada.
    10. Naumann, Fabrice & Bolz, Simon Johannes & Richter, Philipp Moritz, 2022. "Offshoring and Environmental Policy: Firm Selection and Distributional Effects," VfS Annual Conference 2022 (Basel): Big Data in Economics 264086, Verein für Socialpolitik / German Economic Association.
    11. Guilherme MAGACHO & Antoine GODIN & Etienne ESPAGNE, 2022. "Impacts of CBAM on EU trade partners: consequences for developing countries," Working Paper fd822de3-ffa0-44f3-8427-4, Agence française de développement.
    12. Aliénor Cameron & Marc Baudry, 2023. "The case for carbon leakage and border adjustments: where do economists stand?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 435-469, July.
    13. Xinxin Liao & Zhuo Ning, 2022. "Welfare Implications of Border Carbon Adjustments on the Trade of Harvested Wood Products," IJERPH, MDPI, vol. 20(1), pages 1-16, December.
    14. J. G. Fournier Gabela & F. Freund, 2023. "Potential carbon leakage risk: a cross-sector cross-country assessment in the OECD area," Climatic Change, Springer, vol. 176(5), pages 1-21, May.
    15. Stefano Carattini & Giseong Kim & Givi Melkadze & Aude Pommeret, 2023. "Carbon Taxes and Tariffs, Financial Frictions, and International Spillovers," CESifo Working Paper Series 10851, CESifo.
    16. repec:bon:boncrc:crctr224_2024_495 is not listed on IDEAS

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