concept

Border Carbon Adjustment

Also known as: BCAs, BCA, border-carbon adjustment mechanisms

Facts (42)

Sources

Designing Carbon Pricing Policies Across the Globe link.springer.com Springer 36 facts

referenceCosbey et al. (2019) provide guidance for implementing border carbon adjustments, outlining lessons, cautions, and research needs in the Review of Environmental Economics and Policy.

claimSupport for Border Carbon Adjustment (BCA) is widespread among experts without much heterogeneity.

claimExperts who reply to the initial survey invitation do not provide different recommendations on average regarding carbon taxes, cap-and-trade, Border Carbon Adjustments (BCA), or revenue uses compared to those who reply after a reminder.

claimExperts who do not reveal their identity provide similar recommendations regarding carbon taxes, cap-and-trade, Border Carbon Adjustments (BCA), and revenue use categories compared to experts who do reveal their identity.

measurementExperts who responded to the second invitation were less likely to support the introduction of Border Carbon Adjustments (BCA) compared to those who responded to the first invitation (66% vs. 78%; χ2-test: p = 0.020), whereas experts who responded to the final invitation were more likely to support BCA compared to earlier respondents (85% vs. 72%; χ2-test: p = 0.023).

claimThere is a lack of representative literature regarding expert views on the implementation of border carbon adjustments (BCA) and the usage of revenues generated from carbon pricing.

measurement75% of experts strongly recommend using Border Carbon Adjustment (BCA) to address competitiveness concerns, with little variation across continents and countries.

procedureThe authors of 'Designing Carbon Pricing Policies Across the Globe' reweight recommendations on carbon taxes, cap-and-trade, Border Carbon Adjustments (BCA), and revenue use options by the characteristics of both respondents and non-respondents to test for non-response bias.

claimBorder Carbon Adjustment (BCA) has been discussed as a potential barrier to trade, but it may also be a mechanism for establishing effective carbon prices unilaterally in a non-cooperative world or for fostering international cooperation.

measurementThe relationship between CO2 emissions per capita and experts' recommendation of Border Carbon Adjustment (BCA) is negative and significant at the 10% level in the multivariate analysis, whereas it is statistically insignificant in the univariate analysis.

claimThe implementation of Border Carbon Adjustments (BCA) may involve significant bureaucratic costs and legal challenges, as noted by Kruse-Andersen and Sørensen (2021), Böhringer et al. (2022), and Dominioni and Esty (2022).

claimBorder carbon adjustment (BCA) is considered controversial due to complex legal issues, although studies by Böhringer et al. (2022), Helm and Schmidt (2015), Al Khourdajie and Finus (2020), and Beaufils et al. (2024) suggest it can address competitiveness issues and foster international cooperation.

measurementSupport for Border Carbon Adjustment (BCA) is positively related to the recommendation of more stringent global emission reduction targets (at the 10% significance level).

claimThe expert survey on border carbon adjustment (BCA) aimed to determine whether experts generally find BCA highly recommendable, without specifying the instrument choice or implementation details associated with the scheme.

measurementExperts from countries with a cap-and-trade scheme are less likely to recommend Border Carbon Adjustment (BCA), showing a negative association with a p-value of 0.033.

referenceCosbey et al. (2019) discuss how legal challenges within the World Trade Organization (WTO) interact with the design of national carbon pricing systems and border carbon adjustment (BCA) schemes.

referenceBöhringer et al. (2022) analyze the potential impacts and challenges associated with implementing border carbon adjustments in the journal Nature Climate Change.

claimAll experts from Switzerland strongly recommend the usage of Border Carbon Adjustments.

claimThe literature on border carbon adjustment (BCA/CBAM) was initiated by concerns regarding carbon leakage, as documented by Hoel (1996).

referenceHelm and Schmidt (2015) published the article 'Climate cooperation with technology investments and border carbon adjustment' in the European Economic Review, volume 75.

claimThe survey on carbon pricing design included questions on instrument choice, border carbon adjustment, revenue usage, and potential determinants of experts' recommendations such as global emission reduction targets or expected climate damages.

measurementApproximately 5% of the total variation in expert support for Border Carbon Adjustments (BCA) can be explained by the study's data on determinants, country characteristics, and expert characteristics.

referenceDominioni and Esty (2022) discuss the design of effective border-carbon adjustment mechanisms to align global trade and climate change regimes in the Arizona Law Review.

measurement74% of all surveyed experts strongly recommend the use of Border Carbon Adjustments (BCA) if their country plans to implement a new carbon pricing scheme unilaterally.

claimSupport for Border Carbon Adjustments (BCA) remains consistently high across different levels of GDP per capita.

claimHigher carbon prices may increase the relevance of using Border Carbon Adjustments (BCA) to address competitiveness concerns, as noted by Nachtigall (2019).

claimThe European Association of Environmental and Resource Economists (EAERE) conducted a survey among environmental economists in Europe in 2022 regarding border carbon adjustment.

measurementSupport for Border Carbon Adjustments (BCA) is negatively correlated with publishing in economics journals, with 70% of economists supporting BCA compared to 80% of non-economists (χ2-test: p = 0.032).

claimExperts who support Border Carbon Adjustment (BCA) tend to recommend using carbon pricing revenues for green research and development more often than those who do not (p < 0.001).

referenceAl Khourdajie and Finus (2020) examine measures to improve the effectiveness of international climate agreements, specifically focusing on the role of border carbon adjustments.

claimThe study 'Designing Carbon Pricing Policies Across the Globe' documents strong support among academic experts for the use of carbon taxes and border carbon adjustment as climate policy instruments.

claimExperts from Norway are split equally regarding whether to strongly recommend the use of Border Carbon Adjustments.

referenceThe 'Economists’ Statement on Carbon Pricing' (EAERE 2019) suggests Border Carbon Adjustments (BCA) as a potential solution for carbon pricing in a multilateral context.

measurementThree-quarters of the academic experts surveyed in a global study strongly recommend using border carbon adjustment to address competitiveness concerns related to unilateral carbon pricing.

perspectiveBöhringer et al. (2022) argue that most countries avoid implementing border carbon adjustment (BCA) to mitigate the risk of trade conflicts, despite the instrument's potential appeal.

claimThere is a positive correlation between recommendations for carbon taxes and border carbon adjustments (BCA), significant at the 10-percent level, likely because border carbon adjustments are more easily implemented with carbon taxes than with cap-and-trade systems.

Research & Publications – Home - MIT Sites sites.mit.edu Michael Mehling · MIT 6 facts

claimBorder carbon adjustments (BCAs) that base adjustment levels on default carbon intensities run counter to the economic logic of carbon pricing because they distort incentives for emissions abatement.

referenceThe article 'Bridging the Divide: Assessing the Viability of International Cooperation on Border Carbon Adjustments' argues for international cooperation on Border Carbon Adjustments and evaluates the prospects for such cooperation using an analytical framework that examines the 'input legitimacy' and 'output legitimacy' of international cooperative initiatives.

claimThe European Union's Carbon Border Adjustment Mechanism is unlikely to be the only Border Carbon Adjustment, as various jurisdictions are contemplating similar measures to support ambitious climate change mitigation policies, national security, and industrial policy.

claimMany current international initiatives at the intersection of trade and climate policy avoid addressing the contested issue of Border Carbon Adjustments.

claimRequiring producers to demonstrate their actual carbon intensity in border carbon adjustments captures additional economic benefits of carbon pricing and improves the legal prospects of the mechanism, but increases administrative complexity and creates risks of avoidance practices like 'resource shuffling'.

claimThe uncoordinated proliferation of divergent Border Carbon Adjustment designs and implementation strategies among different jurisdictions creates risks of increased uncertainty, higher transaction and administrative costs, and negative repercussions for trade partners.