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

The briefing argues that as countries increase climate ambition, border carbon adjustment (BCA) mechanisms are becoming inevitable to prevent carbon leakage in energy-intensive sectors. To prevent these tools from becoming protectionist, the author proposes a framework of principles—such as the primacy of leakage protection, revenue sharing, and credit for equivalent foreign carbon prices—and best practices regarding coverage, data standards, and appeal mechanisms. The author suggests the World Trade Organization (WTO) as the ideal multilateral forum for discussing these standards, specifically highlighting the 2021 Ministerial Conference (MC12) as a critical starting point.

• 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 intent to implement similar regimes.
• BCA is viewed as a primary method to protect against 'leakage'—the increase of emissions abroad when domestic climate policies impose high carbon costs on energy-intensive, trade-exposed sectors like steel, cement, aluminum, and chemicals.
• The author proposes five core principles for BCA: prioritizing leakage protection over domestic competitiveness or coercion, sharing revenue with exporting firms/countries, avoiding 'double protection' for domestic producers, granting credit for equivalent foreign carbon prices, and ensuring openness and transparency.
• Recommended best practices for implementation include limiting coverage to goods subject to domestic carbon pricing, allowing foreign producers to challenge GHG intensity defaults with actual data, using international accounting standards like the GHG Protocol or ISO 14064, and establishing independent appeal mechanisms.
• The World Trade Organization (WTO) is identified as the ideal multilateral forum for discussing BCA principles, with the November 2021 Ministerial Conference (MC12) cited as a crucial moment for engagement.

APA

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

Chicago

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

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=24 November 2021 |url=https://www.iisd.org/articles/best-practice-border-carbon-adjustment |access-date=23 October 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 = nov, url = {https://www.iisd.org/articles/best-practice-border-carbon-adjustment}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }