Guidance on Border Carbon Adjustment

This report presents guidelines for designing Border Carbon Adjustment (BCA) mechanisms, based on global stakeholder dialogues. It offers specific recommendations on measuring embodied GHG emissions, determining sectoral coverage, managing revenues, and crediting foreign carbon prices. The guidance emphasizes 'parallel treatment' between domestic and foreign producers and suggests mechanisms to support small and medium-sized enterprises (SMEs) and developing countries in their low-carbon transition, while cautioning against blanket country exemptions to maintain the effectiveness of leakage prevention.

• BCA regimes should prioritize the use of actual emissions data over default values to maintain incentives for clean investment and avoid unfairness, although default values are acceptable for complex goods or SMEs where data is inaccessible.
• To ensure fairness and prevent leakage, the scope of emissions and the use of offsets under a BCA should follow the principle of 'parallel treatment,' meaning foreign producers should have the same options and obligations as domestic producers under the associated carbon pricing regime.
• The report recommends that explicit carbon prices paid in exporting countries be credited to avoid double charging, but suggests that the actual price paid should be determined through government-to-government calculations rather than by individual importers.
• There was no consensus on whether to recycle BCA revenues or cover exports; however, if revenues are recycled, they should be additional to pledged climate finance and prioritized for the most affected firms and countries.
• The guidance argues against blanket country-based exemptions to prevent carbon leakage and avoid locking developing nations into high-emission production pathways, suggesting instead targeted support for SMEs and just transition funding.
• To reduce administrative burdens and avoid disproportionate costs for low-value shipments, the report recommends implementing a de minimis rule based on a per-year mass threshold.

APA

Aylett, C., Carpentier, C. L., Chepeliev, M., Contreras, C., Cosbey, A., Denis, M., Ekdahl, Å., Fischer, C., Karingi, S., Lawrence, M. J., Macharia, J. N., Mehling, M. A., Miu, A., Mohan, P., Vu, N. K., Porterfield, M. C., Sharma, A., Veiga, P. D. M., Kumar, N., & Rios, S. P. (2025). Guidance on Border Carbon Adjustment. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-07/border-carbon-adjustment-guidance.pdf

Chicago

Aylett, Chris, Chantal Line Carpentier, Maksym Chepeliev, Claudia Contreras, Aaron Cosbey, Martin Denis, Åsa Ekdahl, et al. Guidance on Border Carbon Adjustment. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-07/border-carbon-adjustment-guidance.pdf.

Wikipedia

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BibTeX

@techreport{aylett2025guidance, author = {Aylett, Chris and Carpentier, Chantal Line and Chepeliev, Maksym and Contreras, Claudia and Cosbey, Aaron and Denis, Martin and Ekdahl, Åsa and Fischer, Carolyn and Karingi, Stephen and Lawrence, Michael J and Macharia, Janet Njambi and Mehling, Michael A. and Miu, Andreea and Mohan, Preeya and Vu, Ngan Kim and Porterfield, Matthew C. and Sharma, Aparna and Veiga, Pedro da Motta and Kumar, Nagesh and Rios, Sandra Polonia}, title = {{Guidance on Border Carbon Adjustment}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = jul, url = {https://www.iisd.org/system/files/2025-07/border-carbon-adjustment-guidance.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }