By comparing experiences with BCAs, this research inquires why BCAs are conspicuously absent in practice, despite their potentially substantial benefits, backing from prominent leaders, and an increasing number of carbon pricing policies being adopted throughout the world. This report Border Carbon Adjustments in Support of Domestic Climate Policies: Explaining the Gap Between Theory and Practice highlights the project’s key findings and presents evidence-based analytical insights about the adoption and implementation of BCAs in practice.
Experiences with and attitudes towards BCAs were examined using the following four case studies: the inclusion of international flights in the European Union’s (EU) cap-and-trade program, stationary installations in the EU’s cap-and-trade program, the inclusion of electricity imports in California’s cap-and-trade program, and industrial facilities in California’s cap-and-trade program. This project draws on a wide range of published materials, such as scholarly literature from different disciplines, government documents, and newspaper articles – including quantitative data, for instance from extant economic modelling and international trade statistics – and supplements these sources with information from 43 expert interviews.
Based on the evidence in these case studies, the research finds several barriers that prevent the adoption and implementation of BCAs in practice. Policy-makers prefer alternative measures – such as free allocation – where they are available, are likely to meet domestic political opposition to BCAs, may run into opposition from other governments and thus face fears of trade war and retaliation, and may encounter concerns about the circumvention of BCAs. Contrary to popular belief among academics, therefore, the circumstances in which BCAs may be implemented successfully, and thus the scope for applying BCAs in practice, appear strikingly narrow.