Border Carbon Adjustment

The industry sector accounts for over one-third of global anthropogenic greenhouse gas (GHG) emissions. The carbon intensive products such as steel, cement, and aluminum industry combined account for around 20% (steel, 11%; cement, 7%; aluminum, 2%) of global CO2 emissions. The emissions from these heavy industries must be reduced sharply for the world to reach the target of the Paris Climate Agreement: to limit global warming to “well below” 2 ℃.

Large quantities of these carbon intensive products are traded across border. Around 22% of global CO2 emissions are embodied in imported goods, thus escaping attribution in the consuming country (the end-user) and instead being debited to the producer country

Since carbon intensity of steel and aluminum production vary substantially between countries, the heterogeneous climate policies across countries risk intensifying carbon leakage as production continues to shift to countries with lower climate ambition or lesser-regulated countries.

Border Carbon Adjustment (BCA) is a policy tool for preventing carbon leakage as some countries, such as the U.S., are taking serious actions to tackle the climate crisis and achieve Paris Agreement’s target.

Global efficiency Intelligence has been investigating the potential impact of Border Carbon Adjustment on carbon-intensive sectors such as steel and aluminum in the US. We assess the impact of a potential U.S. BCA on GHG emissions and revenue of these industries in the U.S. up to 2030.