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The document examines border carbon adjustments (BCAs) as a tool for OECD countries to protect domestic industries from 'unregulated' foreign competition and prevent carbon leakage. It identifies trade-exposed energy-intensive sectors—such as iron, steel, and chemicals—as the most vulnerable. The analysis highlights significant WTO legal hurdles, including national treatment and most-favoured-nation obligations, and suggests that any legal BCA would likely require a firm-by-firm carbon footprint calculation and prior attempts at multilateral agreement. Administratively, the author notes the difficulty of establishing a common metric to compare diverse climate policies and the risk of 'punishing domestic manufacturers' if only basic raw materials are covered. Geopolitically, the document argues that BCAs may conflict with the UNFCCC principle of 'common but differentiated responsibility' and could provoke 'vitriolic' reactions from developing countries, potentially hindering international climate negotiations.

The report analyzes carbon leakage, which occurs when production shifts from regions with high carbon prices to those with lower or no prices, undermining climate policy effectiveness. It examines the EU ETS as a frontrunner and compares it with emerging systems in the US and Japan. The document evaluates mitigation strategies, including free allowance allocation, investment subsidies, and border adjustment measures (BAMs). It specifically analyzes the leakage potential of energy-intensive sectors like cement, steel, and aluminium, and discusses the legal and multilateral challenges of implementing border adjustments under WTO rules.

The report argues that WTO rules provide sufficient flexibility for countries to implement bold climate measures and that the WTO should not be used as an excuse for policy inaction. It analyzes several policy tools, concluding that most are WTO-consistent if designed non-discriminatorily. Specifically, it finds that energy labels and minimum standards are generally permissible under the TBT Agreement and GATT, and that fuel efficiency standards are likely to meet 'necessity' requirements given the urgency of climate change. Border carbon adjustments are viewed as permissible in principle, though they risk contradicting the principle of 'common but differentiated responsibilities' by shifting burdens to developing nations. Green subsidies are also deemed largely compatible, provided they do not mandate the use of domestic products. The authors emphasize that the logic of trade expansion inherent in the WTO is fundamentally at odds with GHG reduction goals, suggesting that 'Kyoto-compliance' should take precedence over 'WTO-compliance'.

The report examines the compatibility of various climate policies—including labelling, fuel efficiency standards, border carbon adjustments, and green subsidies—with WTO law. It concludes that WTO rules do not prevent countries from taking immediate action to combat climate change, provided the measures are properly designed and non-discriminatory. The authors argue against using the WTO as an excuse for policy inaction and suggest that 'Kyoto-compliance' should take priority over 'WTO-compliance' in global governance.

The Climate Strategies Research Prospectus 2009 details a comprehensive program of academic research designed to support government decision-makers. The work is organized into three primary themes: industrialised country commitments and global market mechanisms (including carbon leakage and emissions trading system linkages), global engagement, technology and finance (focusing on the UNFCCC's Reformed Financial Mechanism and technology innovation centres), and industry-specific sectoral approaches (specifically the steel and maritime sectors). The organization operates as a not-for-profit network, convening international experts to provide independent, fact-based assessments for policy formation, with a particular emphasis on the European Union, North America, and the Asia-Pacific region.

The policy brief examines the trade-off between free allowance allocation and border adjustments in emission trading schemes. It argues that while free allowances protect against carbon leakage, they undermine the effectiveness of carbon pricing. The author proposes that combining full auctioning with border adjustments—strictly limited to carbon-intensive commodities and based on the carbon intensity of best available technology—can address leakage. However, to avoid WTO violations and suspicions of protectionism from developing countries, these measures must be pursued through international cooperation rather than unilaterally.

The paper analyzes carbon embedded in China's trade using a Multi-Region Input-Output (MRIO) model. It finds that while China is a net exporter of embedded carbon, this is due to the overall carbon intensity of its economy rather than the specific composition of its exports. The author demonstrates that there is no correlation between revealed comparative advantage and carbon intensity in the Chinese economy. Consequently, the paper argues that border tax adjustments on carbon-intensive imports would have minimal impact on China's trade success and limited benefit for developed countries. Finally, it discusses the theoretical and practical implications of harmonized global carbon prices, suggesting they could enable developing countries to 'leapfrog' to cleaner technologies if supported by public investment.

The report analyzes the Clean Development Mechanism's (CDM) successes and failures, noting a heavy concentration of projects in China, India, and Brazil, while Africa remains largely sidelined. It argues that current project-based modalities and stringent additionality rules create high transaction costs and barriers for Least Developed Countries (LDCs). The authors propose shifting toward programmatic CDM to support small-scale projects and sectoral CDM to address heavy industry, specifically analyzing the Chinese iron and steel sector. Key recommendations include retiring CERs to ensure global emission reductions and reforming additionality testing to be more pragmatic and inclusive.

The report assesses the potential for linking emissions trading schemes (ETS) globally, concluding that an OECD-wide company-level carbon market by 2015 is a "highly ambitious goal." It identifies that while the EU ETS seeks to be a nucleus for a global market, most emerging schemes prioritize domestic price control over full bilateral linking. The study highlights significant barriers to linkage, including divergent target stringencies, the use of intensity-based targets (notably in Canada), and different cost-containment measures like price caps. It distinguishes between unilateral links (one-way recognition), bilateral/multilateral links (mutual recognition), and indirect links (via common mechanisms like the CDM). The report also examines the legal complexities of such links, particularly the constraints on US state-level agreements and the EU's regulatory mandates. It suggests that a "bottom-up" process of linking regional markets could serve as a fallback if top-down international agreements, such as a Kyoto successor, fail.

The document examines the criteria for identifying sub-sectors exposed to a significant risk of carbon leakage under EU ETS Phase III. It argues that calculating additional costs without accounting for free allowances is logically inconsistent, as free allocation is intended to mitigate the very leakage it is meant to identify. Using UK data, the author illustrates that a gradual inclusion of sectors as free allocations decline from 80% in 2013 to 30% by 2020 provides better visibility, allows for learning, reduces economic distortions, and maintains incentives for international climate cooperation.

The document examines the legislative debate in the US regarding the adoption of a nationwide emissions trading scheme and the use of border adjustment measures to prevent carbon leakage and protect industrial competitiveness. It analyzes specific proposals like the Climate Security Act of 2008, arguing that while such measures are likely to be included in future legislation, they face significant legal risks under WTO rules, particularly the most-favored nation principle. The paper contrasts the US focus on 'competitiveness' and 'free-riding' with the EU's focus on 'carbon leakage' and recommends international coordination to avoid trade wars and ensure that such measures are based on environmental rather than protectionist rationales.

The document assesses the 2008 proposal for the Australian Carbon Pollution Reduction Scheme, focusing on its mechanisms for price control and international linking. It examines the implications of a domestic price cap and the potential for bilateral linking with the European Union and New Zealand, while analyzing the impact of 'hot air' units from Russia and Eastern Europe on the global carbon market.

The document argues that while agriculture and forestry offer cost-effective and rapid opportunities for greenhouse gas (GHG) mitigation, they have been fragmented and largely excluded from international policy frameworks. It highlights the significant potential for carbon sequestration in developing countries' soils and forests, while detailing technical barriers such as non-permanence, leakage, and accounting uncertainties. The briefing specifically discusses Canada's efforts to propose a 'Forward Looking Baseline' for forest management and its domestic regulatory approach to carbon offsets.

The report examines the EU ETS, concluding that emissions trading is effective and has modest macroeconomic impacts, though it can create windfall profits and price volatility. It argues that international competitiveness risks are limited to a few carbon-intensive sectors and recommends maximizing auctioning over free allocation to maintain economic efficiency and innovation incentives. The authors caution against unilateral border adjustments, suggesting multilateral arrangements instead to prevent trade disputes and carbon leakage.

The document analyzes the cement industry's CO2 emissions, which stem from limestone calcination, fuel combustion, and electricity use. It identifies abatement options including energy efficiency, alternative fuels, clinker substitutes, and carbon capture and storage (CCS). The paper examines the economic impact of carbon pricing, noting that high carbon costs can lead to carbon leakage—where production shifts to regions with laxer regulations—due to the industry's capital-intensive nature and the high cost of transportation. It suggests that border carbon adjustments may be more effective than fixed free allocation of allowances in mitigating leakage.

The report analyzes the shift in South American countries from a defensive posture toward sustainable development in trade to a more integrated approach. It examines four case studies (Argentina, Brazil, Chile, and Peru), identifying how structural dependencies on natural resources and the influence of developed markets—particularly the US and EU—drive the adoption of environmental and labor standards. While Chile and Peru have integrated these themes through Free Trade Agreements (FTAs), Brazil and Argentina have remained more resistant officially, though private sectors in Brazil are increasingly adapting to international certifications. The document highlights risks such as 'carbon leakage' (the shift of high-emission industries to the region) and new trade barriers related to biofuels and chemical regulations.

The document analyzes the shift in South American countries from a defensive posture toward sustainable development in trade to a more complex engagement driven by free trade agreements (FTAs) and market demands. It highlights how resource-intensive export profiles make these nations vulnerable to unilateral environmental and labor regulations from developed markets, particularly the EU and US. While Chile and Peru have integrated these themes through FTAs, Brazil and Argentina remain officially resistant, though private sectors in Brazil are increasingly adapting to international sustainability standards.

The report argues that Europe can lead a global transition to an eco-efficient economy by synchronising climate, energy, and industrial policies. It examines sector-specific experiences in energy efficiency, district heating, biofuels, renewable electricity, automotive, chemicals, and steel to demonstrate that environmental regulation can drive innovation and competitiveness. The authors propose a strategic agenda focusing on resource systems efficiency, new technology markets, and global carbon pricing, supported by hybrid governance arrangements and a systems-based approach to policy evidence.

The study examines how carbon pricing affects the chemical sector by analyzing individual production processes to identify specific leakage risks. Using Germany as a representative example, it finds that while most chemical sub-sectors face moderate cost increases, certain basic chemicals—such as calcium carbide, chlorine, and soda ash—experience significant cost increases relative to their net production value. The report suggests that for some substances, like chlorine, high transport costs and risks may mitigate leakage, while others may require tailored policy instruments such as conditional free allowances or state aid.

The report critiques REDD, asserting that it is designed to reduce rather than stop deforestation and may incentivize the replacement of natural forests with carbon-poor plantations. It warns that financing REDD through carbon markets could allow industrialized nations to avoid reducing fossil fuel emissions, undermine national sovereignty in developing countries, and lead to the displacement of indigenous communities. The author argues that REDD's 'opportunity cost' calculations often benefit polluters and that the mechanism is susceptible to market volatility and corporate lobbying. The document advocates for a non-market, grant-based funding system managed by the UN, focused on ecosystem justice, the recognition of indigenous land rights, and the elimination of the underlying drivers of deforestation.