INTERNATIONAL COOPERATION TO LIMIT THE USE OF BORDER ADJUSTMENT

The report details a workshop on border adjustment mechanisms (BAMs) as a tool to combat carbon leakage and transition from free allowance allocation to full auctioning of carbon permits. It argues that BAMs should be limited to a narrow set of carbon-intensive commodities (1-2% of GDP) to avoid becoming protectionist 'sticks' or non-tariff trade barriers. The discussion explores implementation options, such as basing adjustments on 'best available technology' or 'average domestic production', and suggests international coordination to define eligible products, harmonise procedures, and provide flexibility for least developed countries.

• Carbon pricing primarily impacts a small number of basic commodities, such as basic iron, clinker, and certain chemicals, which represent only 1-2% of total GDP in developed countries but account for 10-20% of CO2 emissions.
• The perceived role of border adjustment has shifted from being a 'stick' to force other countries into climate agreements toward a sector-specific tool designed to create domestic incentives for low-carbon investment and consumption.
• Border adjustments are viewed as a way to facilitate the transition from free allowance allocation—which distorts investment and limits innovation—to full auctioning of allowances.
• Two primary approaches for setting adjustment levels were discussed: using the carbon intensity of the 'best available technology' to address leakage and ensure WTO Art. III compatibility, or using a 'refutable average' based on domestic production to incentivise foreign efficiency.
• To ensure WTO acceptability, the report suggests justifying border adjustments under Article III GATT, with Article XX GATT serving as a second resort to emphasise the international nature of the approach.
• International cooperation could take the form of formal agreements via the WTO or UNFCCC, or informal guidelines, to provide a list of eligible commodities, determine the inclusion of indirect electricity emissions, and offer flexibility for least developed countries (LDCs).

APA

Neuhoff, K., Ismer, R., & Yu, V. P. B. (2008). INTERNATIONAL COOPERATION TO LIMIT THE USE OF BORDER ADJUSTMENT. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/ba-workshop-report-nov-6-2008.pdf

Chicago

Neuhoff, Karsten, Roland Ismer, and Vicente Paolo B. Yu. INTERNATIONAL COOPERATION TO LIMIT THE USE OF BORDER ADJUSTMENT. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/ba-workshop-report-nov-6-2008.pdf.

Wikipedia

{{cite report |last1=Neuhoff |first1=Karsten |last2=Ismer |first2=Roland |last3=Yu |first3=Vicente Paolo B. |title=INTERNATIONAL COOPERATION TO LIMIT THE USE OF BORDER ADJUSTMENT |publisher=Climate Strategies |date=6 November 2008 |url=https://climatestrategies.org/wp-content/uploads/2014/11/ba-workshop-report-nov-6-2008.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{neuhoff2008international, author = {Neuhoff, Karsten and Ismer, Roland and Yu, Vicente Paolo B.}, title = {{INTERNATIONAL COOPERATION TO LIMIT THE USE OF BORDER ADJUSTMENT}}, institution = {Climate Strategies}, year = {2008}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2014/11/ba-workshop-report-nov-6-2008.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }