Border Carbon Adjustments: Priorities for international cooperation

This policy brief by the International Institute for Sustainable Development (IISD) examines the need for international cooperation on the design and implementation of Border Carbon Adjustments (BCAs). It identifies key technical and political friction points—such as emissions calculation standards, geographical exemptions, and revenue use—and evaluates various multilateral, regional, and bilateral forums that could facilitate a coordinated approach to avoid trade tensions and administrative burdens.

• Border Carbon Adjustments (BCAs) are designed to ensure imports face the same carbon costs as domestic products, but their proliferation risks creating international tension and administrative burdens for traders in sectors like steel, aluminum, cement, and fertilizers. While the European Union's instrument begins in October 2023, and Canada and the United Kingdom are considering similar measures, relying solely on the World Trade Organization's (WTO) dispute settlement system is viewed as risky because existing multilateral trading rules were not written for this context.
• A critical priority for international cooperation is establishing common standards for calculating embedded greenhouse gas (GHG) emissions. While using actual emissions data from individual installations is the fairest method to incentivize decarbonization, it is costly and lacks an agreed international standard. The alternative—using default assumptions based on sector or national averages—fails to reward cleaner producers. The brief suggests cooperation through the International Organization for Standardization and the WTO's Committee on Technical Barriers to Trade.
• There is a significant political and economic debate regarding the geographical scope of BCAs and potential exemptions for developing countries. Arguments for exemptions are based on the WTO's Special and Differential Treatment and the UNFCCC's principle of Common but Differentiated Responsibilities and Respective Capabilities. However, exemptions could lead to the circumvention of measures by diverting production to exempted jurisdictions, potentially weakening environmental goals.
• Crediting foreign climate policies in BCA pricing is conceptually simple for explicit carbon prices but complex for non-price-based policies, such as forest preservation. While some argue that only explicit prices should be credited, others suggest this violates the UNFCCC Paris Agreement's respect for sovereign choice. The brief warns that bilateral solutions to this issue may favor parties with more leverage and risk cementing the approaches of first movers.
• The use of revenues collected from BCAs is a point of contention; keeping revenues for general government use is difficult to justify if those funds then support domestic industry decarbonization at the expense of foreign exporters. Proposed alternatives include refunding revenues to exporting countries or directing them toward decarbonization efforts via bilateral cooperation or multilateral instruments like the UNFCCC’s Green Climate Fund.
• Various forums are being explored for BCA cooperation, but none have yet reached a consensus or cooperative outcome. These include the WTO (via the Committee on Trade and Environment and the Trade and Environmental Sustainability Structured Discussions), the G7's 'Carbon Club', the G20, APEC, and the OECD. Bilateral discussions, such as those between the EU and the U.S. on steel and aluminum or the EU and India, may move faster but lack the inclusiveness of multilateral formats.

APA

International Institute for Sustainable Development (n.d.). Border Carbon Adjustments: Priorities for international cooperation. https://www.iisd.org/system/files/2023-08/border-carbon-adjustments-international-cooperation.pdf

Chicago

International Institute for Sustainable Development. Border Carbon Adjustments: Priorities for international cooperation. n.d. https://www.iisd.org/system/files/2023-08/border-carbon-adjustments-international-cooperation.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Border Carbon Adjustments: Priorities for international cooperation |url=https://www.iisd.org/system/files/2023-08/border-carbon-adjustments-international-cooperation.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndborder, author = {{International Institute for Sustainable Development}}, title = {{Border Carbon Adjustments: Priorities for international cooperation}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/2023-08/border-carbon-adjustments-international-cooperation.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }