The State of Border Carbon Adjustments 2026
This report analyzes the rise of border carbon adjustments (BCAs), including the European Union’s Carbon Border Adjustment Mechanism (CBAM), UK CBAM, and Australia’s proposals. It examines carbon leakage evidence, policy design features, trade impacts, and evolving World Trade Organization (WTO) debates on climate-related trade measures.
Key Findings
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BCAs are emerging as central tools to address carbon leakage, which empirical evidence confirms is real and significant, though varying widely by sector.
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The European Union and the United Kingdom, and a few other countries, are leading implementation, but BCAs’ design differences strongly shape trade impacts, which remain moderate overall but uneven across partners.
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BCAs are intensifying global trade tensions and cooperation debates, especially at the WTO, with a growing focus on design, fairness, and developing country impacts.
2025 was a year of realignment of domestic and international policies, as countries looked to safeguard their economic priorities while finding ways to maintain their climate ambition. BCAs—mechanisms that place a carbon price on imports from countries without (or with less stringent) emissions pricing policies—have emerged as one of the most prominent solutions. However, as more jurisdictions move from deliberation to implementation, BCAs are also generating some of the most contentious trade and climate diplomacy of this decade.
The global BCA landscape has evolved since the publication of the first edition of State of BCAs in 2025. This report covers national BCA developments in the European Union, the United Kingdom, and Australia; tracks ongoing discussions in other jurisdictions; and surveys the multilateral landscape at the WTO and beyond.
Participating experts
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