This report identifies some of the important carbon border adjustment design elements and discuss options available to policymakers, particularly in the European Union and the United States.
Carbon border adjustments (CBAs) are fees imposed on the imports of commodities and products based on the quantity of greenhouse gases (GHGs) emitted during their production. The purpose of a CBA is to allow the producers of such commodities in countries with highly ambitious climate goals to remain competitive in their domestic markets against imports from less regulated jurisdictions.
CBAs are not part of the current climate and international trade policy mix, but that will change when the European Union’s Carbon Border Adjustment Mechanism (CBAM) goes into effect. Moreover, multiple bills in the US Senate propose CBAs.