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.
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