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Border Carbon Ajustment in Europe and Trade Retaliation: What would be the Cost for European Union?


  • Jean Fouré

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Houssein Guimbard

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Stéphanie Monjon

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, LEDa-CGEMP, Université Paris-Dauphine - Université Paris-Dauphine, PSL Research University)


Unilateral climate policy, such as carbon pricing, represents an additional cost to the economy, especially to energy-intensive industrial sectors, as well as those exposed to international competition. A border carbon adjustment (BCA) is often presented as an attractive policy option for countries that wish to go ahead without waiting for a global climate agreement. We used the computable general equilibrium model MIRAGE to simulate the impact of the introduction of a BCA on imports of energy-intensive products in EU and EFTA countries and to evaluate the exports their main trade partners would lose. Given that a BCA is a trade measure, it might cause disputes at the World Trade Organization (WTO). If the BCA is considered illegal, the losses suffered by some partners may justify trade retaliations. At that point, it would be likely that prohibitive retaliatory tariffs target sensitive products in the EU, which are often related to the European agricultural sector. These trade measures would limit the drop in production in the energy-intensive and trade-exposed (EITE) sectors, but at the expense of the other sectors. Nevertheless, neither the BCA nor retaliation would have sizeable impacts on real income or GDP in the EU or on the retaliators, while leading to a small decrease in global emissions.

Suggested Citation

  • Jean Fouré & Houssein Guimbard & Stéphanie Monjon, 2016. "Border Carbon Ajustment in Europe and Trade Retaliation: What would be the Cost for European Union?," Post-Print hal-01291370, HAL.
  • Handle: RePEc:hal:journl:hal-01291370
    DOI: 10.1016/j.eneco.2015.11.021
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    References listed on IDEAS

    1. Houssein Guimbard & Sébastien Jean & Mondher Mimouni & Xavier Pichot, 2012. "MAcMap-HS6 2007, an Exhaustive and Consistent Measure of Applied Protection in 2007," International Economics, CEPII research center, issue 130, pages 99-122.
    2. Böhringer, Christoph & Balistreri, Edward J. & Rutherford, Thomas F., 2012. "The role of border carbon adjustment in unilateral climate policy: Overview of an Energy Modeling Forum study (EMF 29)," Energy Economics, Elsevier, vol. 34(S2), pages 97-110.
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    6. Monjon, Stéphanie & Quirion, Philippe, 2010. "How to design a border adjustment for the European Union Emissions Trading System?," Energy Policy, Elsevier, vol. 38(9), pages 5199-5207, September.
    7. Lionel Fontagné & Jean Fouré & Maria Priscila Ramos, 2013. "MIRAGE-e: A General Equilibrium Long-term Path of the World Economy," Working Papers 2013-39, CEPII research center.
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    Cited by:

    1. Martin, Ralf & Muûls, Mirabelle & de Preux, Laure B. & Wagner, Ulrich J., 2014. "On the empirical content of carbon leakage criteria in the EU Emissions Trading Scheme," Ecological Economics, Elsevier, vol. 105(C), pages 78-88.

    More about this item


    Emission trading scheme; Border carbon adjustment; Trade retaliation;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth


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