Guidance on Border Carbon Adjustment
Results of the Global Stakeholder Dialogues
The report provides guidance on border carbon adjustment (BCA) that respects development and climate objectives as well as developing country perspectives. It was created by a multistakeholder group of experts to balance trade, climate, and development goals.
Key Messages
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BCA regimes should demand actual data on greenhouse gases embodied in goods but should also allow for the use of non-punitive default values, ensuring interoperability of measurement requirements with other BCA regimes.
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Explicit carbon prices, such as those paid under carbon taxes and emissions trading systems in the exporting country, should be credited under BCA regimes, but non-price-based regulatory costs should not be credited.
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There should not be country-based exemptions for the coverage of a BCA. That is, whole economies should not be exempted from coverage. However, those most affected by the regime should get special treatment in the form of transition periods and dedicated transition support.
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Any goods to be covered by a BCA should also be covered by a domestic regime of carbon pricing—there should be parallel treatment to the extent possible.
BCA is a hot topic in global trade and climate policy, driven in part by the European Union's Carbon Border Adjustment Mechanism coming into force, and with similar regimes pending in the United Kingdom and Norway. Additionally, BCA is increasingly being explored in other countries such as Australia, Canada, Chinese Taipei, and the United States.
If adopted in multiple countries, BCA would have major impacts not only on climate ambition but also on trade flows and development prospects. Yet there is no internationally agreed upon guidance on how to design and implement BCA in a way that advances both climate and development objectives. This leaves national policy-makers creating BCA regimes without a shield to defend against domestic vested interests and leaves affected countries and firms without a yardstick by which to assess proposed BCA regimes.
This guidance—the product of in-country research and consultation in five countries and more than a year of deliberation by a diverse global group of experts—aims to fill that gap. It offers detailed recommendations on BCA design questions, such as:
- How to measure greenhouse gas emissions embodied in goods?
- What goods and emissions to cover?
- What to do with the revenues?
- Whether and how to credit carbon prices paid in the country of export?
- Whether and how to adjust the carbon price for exports?
- What special treatment and exemptions should be granted?
Participating experts
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