Principles and Best Practice in Border Carbon Adjustment: A modest proposal

This briefing by the International Institute for Sustainable Development (IISD) argues that Border Carbon Adjustment (BCA) mechanisms are becoming a reality as countries increase climate ambition. The author proposes a set of international principles and best practices to prevent BCAs from becoming protectionist tools and suggests the World Trade Organization (WTO) as the ideal forum for these discussions.

• Border carbon adjustment (BCA) is transitioning from a theoretical concept to an active policy tool, with the European Commission proposing a mechanism by 2023, and Canada, the United States, and the United Kingdom expressing intentions to implement similar regimes.
• BCA is viewed as a primary method to prevent 'leakage,' which occurs when greenhouse gas emissions increase abroad because strong domestic climate policies drive energy-intensive trade-exposed sectors—such as chemicals, aluminum, cement, and steel—to relocate to countries with lower carbon costs.
• The author proposes five core principles for BCA implementation: prioritizing leakage protection over domestic competitiveness or coercion, sharing revenue with exporting firms or countries, avoiding 'double protection' by adjusting for domestic shields, granting credit for equivalent foreign carbon prices, and ensuring openness through consultation and transparency.
• Proposed best practices for BCA elaboration include limiting coverage to goods subject to domestic carbon pricing, allowing foreign producers to challenge GHG intensity defaults with actual data, using internationally recognized accounting standards (like ISO 14064 or the GHG Protocol), and establishing independent appeal mechanisms.
• The World Trade Organization (WTO) is identified as the most suitable multilateral forum for discussing BCA principles, specifically suggesting an informal working group or a parallel forum rather than a binding consensus agreement, with the November 2021 Ministerial Conference (MC12) as a critical entry point.

APA

Cosbey, A. (2021). Principles and Best Practice in Border Carbon Adjustment: A modest proposal. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-09/border-carbon-adjustment-modest-proposal.pdf

Chicago

Cosbey, Aaron. Principles and Best Practice in Border Carbon Adjustment: A modest proposal. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-09/border-carbon-adjustment-modest-proposal.pdf.

Wikipedia

{{cite report |last1=Cosbey |first1=Aaron |title=Principles and Best Practice in Border Carbon Adjustment: A modest proposal |publisher=International Institute for Sustainable Development |date=September 2021 |url=https://www.iisd.org/system/files/2021-09/border-carbon-adjustment-modest-proposal.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cosbey2021principles, author = {Cosbey, Aaron}, title = {{Principles and Best Practice in Border Carbon Adjustment: A modest proposal}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = sep, url = {https://www.iisd.org/system/files/2021-09/border-carbon-adjustment-modest-proposal.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }