Designing Border Carbon Adjustments for Enhanced Climate Action

The report examines border carbon adjustments (BCAs) as a tool to prevent carbon leakage and incentivize climate ambition among trade partners. It analyzes past proposals in the EU and US, evaluates the legal constraints imposed by the WTO, and provides a comprehensive design framework. The authors recommend a BCA focused on imports of primary goods from energy-intensive sectors, utilizing global sectoral benchmarks for emissions and ensuring revenues benefit developing countries.

• Carbon leakage occurs through three primary channels: changes in production costs, shifts in capital flows, and changes in fossil fuel consumption, which can undermine the environmental effectiveness of domestic climate policies.
• Existing 'behind-the-border' measures to counter leakage, such as free allocation of emission rights and output-based rebates, have often led to regulatory capture, windfall profits, and muted policy signals.
• To minimize legal risks under WTO law, BCAs should be limited to imports only, as applying them to exports through rebates could be classified as a prohibited export subsidy under the SCM Agreement.
• A legally durable BCA should avoid discrimination based on country of origin and instead focus on the carbon content of products, while providing exemptions for Least Developed Countries (LDCs).
• The report recommends focusing BCA coverage on primary goods from energy-intensive and trade-exposed sectors, such as cement, steel, and aluminium, to reduce administrative burdens while maintaining environmental benefits.
• For calculating embedded carbon, the report proposes using global average sectoral benchmarks for direct emissions and regional emission factors for indirect emissions to avoid problematic links to specific country characteristics.
• Revenues generated from BCAs should be allocated to support mitigation and adaptation efforts in developing countries rather than accruing to the implementing country's general budget.
• BCAs should be temporary and include a sunset clause to prevent them from becoming entrenched once the risk of carbon leakage has diminished.
• The only meaningful implementation of a BCA identified in the report is in California, which applies to electricity imports from neighboring states to prevent leakage.

APA

Mehling, M., van Asselt, H., Das, K., Droege, S., & Verkuijl, C. (2017). Designing Border Carbon Adjustments for Enhanced Climate Action. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2017/12/CS_report-Dec-2017-4.pdf

Chicago

Mehling, Michael, Harro van Asselt, Kasturi Das, Susanne Droege, and Cleo Verkuijl. Designing Border Carbon Adjustments for Enhanced Climate Action. Climate Strategies, 2017. https://climatestrategies.org/wp-content/uploads/2017/12/CS_report-Dec-2017-4.pdf.

Wikipedia

{{cite report |last1=Mehling |first1=Michael |last2=van Asselt |first2=Harro |last3=Das |first3=Kasturi |last4=Droege |first4=Susanne |last5=Verkuijl |first5=Cleo |title=Designing Border Carbon Adjustments for Enhanced Climate Action |publisher=Climate Strategies |date=December 2017 |url=https://climatestrategies.org/wp-content/uploads/2017/12/CS_report-Dec-2017-4.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mehling2017designing, author = {Mehling, Michael and van Asselt, Harro and Das, Kasturi and Droege, Susanne and Verkuijl, Cleo}, title = {{Designing Border Carbon Adjustments for Enhanced Climate Action}}, institution = {Climate Strategies}, year = {2017}, month = dec, url = {https://climatestrategies.org/wp-content/uploads/2017/12/CS_report-Dec-2017-4.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }