Climate and Competitiveness: Border Carbon Adjustments in Action

The report examines the emergence of border carbon adjustments (BCAs), such as the EU CBAM, and their impact on global trade and competitiveness. It provides a 'PACE' framework (Plan, Achieve, Change, Engage) to help companies in carbon-intensive sectors—specifically in Brazil, South Africa, India, and China—transition to low-carbon operations, manage compliance, and leverage green finance to maintain market access.

• Border carbon adjustments (BCAs) are designed to prevent carbon leakage by levying charges on embedded emissions of imported goods at a price equivalent to the importing country's domestic carbon policies.
• The European Union's Carbon Border Adjustment Mechanism (EU CBAM) is the first operational BCA globally; it is currently in a transitional reporting phase until the end of 2025, with full obligations and the phase-out of free carbon allowances for EU industries beginning in January 2026.
• Companies in the BASIC group (Brazil, South Africa, India, and China) are adopting diverse strategies to manage BCA exposure, including the use of internal 'shadow' carbon pricing to guide capital expenditure and the implementation of digital measurement, reporting, and verification (MRV) systems.
• The report identifies a risk of 'carbon poverty' for micro, small, and medium-sized enterprises (MSMEs) in developing economies, who may be excluded from international supply chains due to a lack of financial or technical capacity to report emissions.
• Strategic responses to BCAs include 'strategic localization,' where companies establish manufacturing bases within BCA-regulating jurisdictions to avoid liabilities on finished goods and reduce transportation emissions.
• The report proposes the PACE framework (Plan, Achieve, Change, Engage) as a strategic guide for executives to manage carbon-pricing policies through internal governance, compliance, operational decarbonization, and stakeholder collaboration.
• Financial barriers to deep decarbonization include short payback expectations from internal gatekeepers (typically two to five years), which conflict with the long-term capital expenditure required for low-carbon technology.
• Reducing supply chain emissions can significantly improve financial performance; one analysis of a European automotive OEM suggests that companies doing so could increase EBIT by 15% to 50% by 2030.

APA

World Economic Forum (2025). Climate and Competitiveness: Border Carbon Adjustments in Action. https://reports.weforum.org/docs/WEF_Climate_and_Competitiveness_Border_Carbon_Adjustments_in_Action_2025.pdf

Chicago

World Economic Forum. Climate and Competitiveness: Border Carbon Adjustments in Action. 2025. https://reports.weforum.org/docs/WEF_Climate_and_Competitiveness_Border_Carbon_Adjustments_in_Action_2025.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Climate and Competitiveness: Border Carbon Adjustments in Action |date=December 2025 |url=https://reports.weforum.org/docs/WEF_Climate_and_Competitiveness_Border_Carbon_Adjustments_in_Action_2025.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2025climate, author = {{World Economic Forum}}, title = {{Climate and Competitiveness: Border Carbon Adjustments in Action}}, institution = {World Economic Forum}, year = {2025}, month = dec, url = {https://reports.weforum.org/docs/WEF_Climate_and_Competitiveness_Border_Carbon_Adjustments_in_Action_2025.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }