Border Carbon Adjustment and International Trade: A Literature Review

32 Pages Posted: 24 Nov 2015

See all articles by Madison Condon

Madison Condon

New York University School of Law; Columbia University - Columbia Earth Institute

Ada Ignaciuk

Organization for Economic Co-Operation and Development (OECD)

Date Written: 2013

Abstract

An important source of political opposition to measures aimed at reducing emissions of greenhouse gases (GHGs) arises from concerns over their negative effects on the competitiveness of domestic firms, especially those that are energy-intensive and exposed to competition from foreign producers. Politicians and industry representatives alike fear that imports from countries without similar regulations can gain cost-of-production advantages over domestic goods. With many of the major economies of the world contemplating unilateral action to restrict their carbon emissions (while continuing to pursue co-ordinated multilateral action), the parallel concern of carbon leakage — whereby domestic reductions in emissions are partially or wholly counterbalanced by increased emissions elsewhere in the world — has also arisen. Various adjustments have been proposed, both in the academic literature and in draft climate legislation, including levying a border tax or requiring importers to surrender a quantity of carbon permits. Collectively, these kinds of adjustments are often referred to as border carbon adjustments, or BCAs. This note reviews the existing literature on BCAs and alternatives to BCAs and discusses what various researchers have concluded about the efficacy of BCAs from both a trade and an environmental perspective.

Keywords: Border carbon adjustment, border tax adjustment, climate change, trade and environment

JEL Classification: F13, F18, F53, F59, F64, H23, K32, K33, Q48, Q54, Q58

Suggested Citation

Condon, Madison and Ignaciuk, Ada, Border Carbon Adjustment and International Trade: A Literature Review (2013). OECD Working Paper No. 6. Available at SSRN: https://ssrn.com/abstract=2693236 or http://dx.doi.org/10.2139/ssrn.2693236

Madison Condon (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

HOME PAGE: http://policyintegrity.org/madison-condon

Columbia University - Columbia Earth Institute ( email )

314 Low Library
535 West 116th Street, MC 4327
New York, NY 10027
United States

Ada Ignaciuk

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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