When governments take strong unilateral action on climate change, they will always consider border carbon adjustment (BCA) as a means to deal with competitiveness and leakage issues. But while this tool appears straightforward it is plagued by deeply complex problems in practice, including trade law considerations, methodological challenges and consistency with principles such as common but differentiated responsibility. This guidance is the product of a seven-person international expert drafting group that wrestled with those issues and others for over two years. It goes into rare depth on all the issues that policy-makers would need to consider in building and implementing a regime of BCA. It also serves as a benchmark by which targeted exporters can assess such schemes.
Summary of Recommendations
What is BCA?
Why apply BCA?
Criteria for judging BCA regime options
Scope of applicability
Identifying goods/sectors to be covered
Determining the level and type of adjustment
Assessing the carbon content
Modifications to the adjustment level
Type of adjustment
Pricing the carbon content
The application of BCA to exports
Use of revenues from import adjustments
Other design guidance