Border Carbon Adjustments in a Post-Paris World: Same Old, Same Old, but Different?

In: Daniel Esty and Susan Biniaz (Eds.), Cool Heads in a Warming World: How Trade Policy Can Help Fight Climate Change. New Haven, CT: Yale Center for Environmental Law & Policy, 2020

26 Pages Posted: 5 Jun 2020

See all articles by Harro van Asselt

Harro van Asselt

University of Eastern Finland - School of Law

Michael A. Mehling

MIT Center for Energy and Environmental Policy Research (CEEPR)

Date Written: May 8, 2020

Abstract

With the adoption of the Paris Agreement in 2015, nations ushered in a new era of international climate change cooperation. To meet the Agreement’s goals, countries need to adopt increasingly ambitious national emissions control pledges. While the Agreement covers all countries, ambition levels and the implementation of policy measures will likely vary. Any unevenness in ambition or implementation will increase pressure on policy makers to prevent loss of competitiveness, relocation of carbon-intensive production to other countries (carbon leakage), and free rider behavior. Addressing these issues will likely require measures providing some form of remedy for producers subject to carbon constraints. This paper focuses on one such proposal: border carbon adjustments, which are charges levied on the greenhouse gases emitted during the production of a good. In recent years, policy makers have increasingly pushed for the development of a carbon charge imposed at the border. However, if border adjustments are implemented, policy makers need to address concerns about violating international trade law. This paper outlines how such a design could be developed. First, we introduce the concept of border carbon adjustments and explain how they have featured in policy discussions thus far. We then examine the compatibility of border carbon adjustments with World Trade Organization (WTO) law. Finally, we outline several design principles that could guide the adoption and implementation of such measures.

Keywords: climate change, trade, Paris Agreement, border carbon adjustments, WTO, carbon leakage

Suggested Citation

van Asselt, Harro and Mehling, Michael A., Border Carbon Adjustments in a Post-Paris World: Same Old, Same Old, but Different? (May 8, 2020). In: Daniel Esty and Susan Biniaz (Eds.), Cool Heads in a Warming World: How Trade Policy Can Help Fight Climate Change. New Haven, CT: Yale Center for Environmental Law & Policy, 2020, Available at SSRN: https://ssrn.com/abstract=3595988 or http://dx.doi.org/10.2139/ssrn.3595988

Harro Van Asselt (Contact Author)

University of Eastern Finland - School of Law ( email )

Joensuu
Finland

Michael A. Mehling

MIT Center for Energy and Environmental Policy Research (CEEPR) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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