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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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    References listed on IDEAS

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    1. Gerlagh, Reyer & Kuik, Onno, 2014. "Spill or leak? Carbon leakage with international technology spillovers: A CGE analysis," Energy Economics, Elsevier, vol. 45(C), pages 381-388.
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