Border Carbon Adjustments Options and Considerations for Policy Design

Border carbon adjustments (BCAs) are a policy instrument intended to preserve the economic competitiveness of select heavy-emitting industries as countries accelerate their decarbonization efforts. The term border carbon adjustment is used to refer to the general form of this policy type; however, specific examples referenced in this document utilize a range of naming conventions. By placing a price on the greenhouse gas emissions embedded in traded goods, BCAs level the playing field between producers in highly regulated environments and those in less stringent jurisdictions.

BCAs are multifaceted policies, impacting not only domestic and international emissions, but also the flow of international trade and the domestic production of strategic goods. Policymakers must therefore carefully evaluate the impacts, intended and otherwise, they create by implementing a BCA. This overview draws on existing and proposed policies to analyze the choices that policymakers face when designing a BCA; it lays out available policy options, detailing their associated costs and benefits.