Cited by 85Climate Change Policy and EconomicsEU Law and Policy AnalysisAgricultural Economics and Policy

A border adjustment for the EU ETS: reconciling WTO rules and capacity to tackle carbon leakage

Monjon, Stéphanie, Quirion, Philippe·2011·Climate Policy

Abstract

This article compares several configurations of a border adjustment (BA) to the EU Emissions Trading Scheme (EU ETS) that are designed to maximize their World Trade Organisation (WTO) compatibility, either with the GATT general regime or with Article XX (its environmental exception rule). The different BAs are assessed quantitatively using the partial equilibrium model CASE II, which represents four sectors included in the EU ETS (cement, aluminium, steel and electricity). The main findings indicate that the inclusion of imports and exports would reduce world emissions more than the inclusion of imports alone, that an obligation to buy EU allowances is more compatible with WTO rules than one based on a tax, and would be better at reducing world emissions. Moreover, if the BA is based on best available technologies, more precisely on the recently defined EU product-specific benchmarks, then the adjustment would only be partial and carbon leakage would nevertheless be significantly reduced. The popular view that a BA contributes to both carbon leakage limitation and to domestic production preservation is discussed, and it is argued on the contrary that although a BA would efficiently limit leakage, a decrease in European production of GHG-intensive products is to be expected. Industries that consume cement, aluminium and steel would pay more for these goods with a BA. Consequently, the price signal should be preserved and diffused in downstream sectors, an expected key result of climate policy. On the contrary, free allocation efficiently preserves domestic production, but does not preserve and diffuse the price signal and is less efficient in limiting leakage.

Integrity signals

Registry

Crossref · 10.1080/14693062.2011.601907

Cites

22 of 22 references verified0 citation errors · 0 not checkable

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Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • These issues are of limited relevance for countries without significant exports.

    “These issues are of limited relevance for countries without significant exports (100, 104).”

    From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [100]

  • Studies show considerable loss in effectiveness and efficiency with large deviations from a theoretically sound to a WTO-compatible BCA design.

    “Studies show considerable loss in effectiveness and efficiency with large deviations from a theoretically sound to a WTO-compatible BCA design (100).”

    From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [100]

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Authors
Monjon, S., & Quirion, P.
Affiliations
  • Centre d'Etudes Prospectives et d'Informations Internationales (FR)
  • CIRED (FR)
Corresponding author
Monjon, Stéphanie
Venue
Climate Policy
Published
2011-09
Volume
11
Issue
5
Pages
1212-1225
ISSN
  • 1469-3062 (ISSN-L)
  • 1752-7457
OpenAlex
W2039687023
Cited by
85
References
22
Citations by year
2026: 1 · 2025: 4 · 2024: 7 · 2023: 5 · 2022: 11 · 2021: 5 · 2020: 6 · 2019: 4 · 2018: 5 · 2017: 2 · 2016: 6 · 2015: 9 · 2014: 7 · 2013: 7 · 2012: 6
FWCI
16.22
Type
journal article
Language
en
Open access
closed
Locations
  • Climate Policy (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • AgEcon Search (University of Minnesota, USA) (submittedVersion)
  • HAL (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
  • Social Sciences › Law › EU Law and Policy Analysis
  • Life Sciences › Agricultural and Biological Sciences › General Agricultural and Biological Sciences › Agricultural Economics and Policy
Keywords
border adjustment, EU Emissions Trading System, carbon leakage, WTO compatibility, GATT Article XX, environmental exceptions, carbon pricing, best available techniques, cement industry, aluminum industry, steel industry, electric utilities

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