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Potential impacts and challenges of border carbon adjustments

Nature Climate Change volume 12, pages 22–29 (2022)Cite this article

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Abstract

Harmonized carbon pricing across borders is hard to achieve in the real world as carbon leakage can reduce the cost-effectiveness of unilateral approaches to reduce global emissions. To address this problem, border carbon adjustments (BCAs) would apply the domestic carbon price to emissions embodied in traded goods, which levels the playing field for emissions-intensive and trade-exposed industries. Here, we review the potential environmental and economic impact of border carbon adjustments on leakage reduction, competitiveness restoration, cost-effectiveness, equity and cooperation enhancement. We find that the viability of border carbon adjustment schemes can be substantially reduced with the current legal and practical implementation constraints.

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Fig. 1: Composition of carbon content for EITE goods between OECD and non-OECD countries.
Fig. 2: Exports of embodied carbon in EITE goods from non-OECD G20 regions to OECD and non-OECD countries.
Fig. 3: Exports of embodied carbon in EITE goods from OECD G20 regions to OECD and non-OECD countries.
Fig. 4: Import and export shares for EITE industries.

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Authors and Affiliations

  1. Department of Business Administration, Economics and Law, Carl von Ossietzky University of Oldenburg, Oldenburg, Germany

    Christoph Böhringer

  2. Department of Spatial Economics, Vrije Universiteit Amsterdam, Amsterdam, Netherlands

    Carolyn Fischer

  3. Department of Economics, University of Ottawa, Ottawa, ON, Canada

    Carolyn Fischer

  4. Development Research Group, World Bank, Washington, DC, USA

    Carolyn Fischer

  5. School of Economics and Business, Norwegian University of Life Sciences, Ås, Norway

    Knut Einar Rosendahl

  6. Statistics Norway, Oslo, Norway

    Knut Einar Rosendahl

  7. College of Agricultural & Life Sciences, University of Wisconsin-Madison, Madison, WI, USA

    Thomas Fox Rutherford

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Böhringer, C., Fischer, C., Rosendahl, K.E. et al. Potential impacts and challenges of border carbon adjustments. Nat. Clim. Chang. 12, 22–29 (2022). https://doi.org/10.1038/s41558-021-01250-z

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