How to Design Border Carbon Adjustments that Work for the Climate

The policy brief argues that border carbon adjustments (BCAs) are a more effective tool for addressing emissions leakage than traditional 'behind the border' measures like free allowances. It outlines a specific six-step design process: determining scope and coverage, calculating embedded carbon, determining the adjustment level, deciding revenue use, establishing an expiration date, and ensuring a fair and transparent process. The authors recommend that BCAs focus on primary goods in high-carbon sectors, apply only to imports to avoid WTO subsidy issues, and exempt Least Developed Countries. Revenue generated should be used to support environmental objectives and benefit affected developing countries. The brief also notes that while BCAs have been proposed in the EU and US, they are rarely implemented.

• Emissions leakage occurs when a country's emissions reductions are offset by increases elsewhere due to relocated production or displaced fuel consumption, which can "seriously undermine climate action".
• Traditional measures to combat leakage, such as output-based rebates and free allocation of emission allowances, have often failed due to "regulatory capture, perverse incentives, and windfall profits".
• To minimize legal risks and administrative burdens, BCAs should apply only to imports and focus on "primary goods, i.e. commodities from sectors with high carbon cost and trade exposure".
• The calculation of embedded carbon should include both direct emissions and indirect emissions from energy, utilizing "Global average sectoral benchmarks for direct emissions" and regional or local factors for indirect emissions.
• To prevent BCAs from becoming permanent fiscal tools, they should be "temporary in nature and contain a sunset clause" that triggers expiration once leakage rates drop below a specific level.

APA

Mehling, M., Das, K., Dröge, S., van Asselt, H., & Verkuijl, C. (2017). How to Design Border Carbon Adjustments that Work for the Climate. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2017/11/CS_WP2-Brief_FINAL-1.pdf

Chicago

Mehling, Michael, Kasturi Das, Susanne Dröge, Harro van Asselt, and Cleo Verkuijl. How to Design Border Carbon Adjustments that Work for the Climate. Climate Strategies, 2017. https://climatestrategies.org/wp-content/uploads/2017/11/CS_WP2-Brief_FINAL-1.pdf.

Wikipedia

{{cite report |last1=Mehling |first1=Michael |last2=Das |first2=Kasturi |last3=Dröge |first3=Susanne |last4=van Asselt |first4=Harro |last5=Verkuijl |first5=Cleo |title=How to Design Border Carbon Adjustments that Work for the Climate |publisher=Climate Strategies |date=October 2017 |url=https://climatestrategies.org/wp-content/uploads/2017/11/CS_WP2-Brief_FINAL-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mehling2017how, author = {Mehling, Michael and Das, Kasturi and Dröge, Susanne and van Asselt, Harro and Verkuijl, Cleo}, title = {{How to Design Border Carbon Adjustments that Work for the Climate}}, institution = {Climate Strategies}, year = {2017}, month = oct, url = {https://climatestrategies.org/wp-content/uploads/2017/11/CS_WP2-Brief_FINAL-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }