As governments plan for climate action, BCA is no longer a hypothetical. Addressing climate change almost certainly means requiring energy-intensive trade-exposed sectors such as steel, cement, aluminum, and chemicals to bear a measure of the cost of their carbon emissions. The inevitable partner to substantial prices on carbon in some jurisdictions is an attempt to protect against leakage—that is, the increase of emissions abroad in response to strong domestic climate policies. The European Commission has proposed implementing a carbon border adjustment mechanism by 2023, Canada has launched formal consultations on the shape of its own regime, and the United States and the United Kingdom have signalled a similar interest. However, these measures are likely to lead to directly impacts on the exports of trading partners, most immediately those that export in the sectors covered by the BCA. The measures are also going to involve significant up-front and ongoing costs for affected businesses.

This session will review the links between the UNFCCC and WTO policy processes and then explore the implications of trade-related measures linked to carbon pricing; border carbon adjustments in particular.