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The Inclusion of Border Carbon Adjustments in Preferential Trade Agreements: Policy Implications

Kateryna Holzer, Nashina Shariff

DOI https://doi.org/10.21552/CCLR/2012/3/222



Preferential Trade Agreements (PTAs) are an increasingly important part of the global trading system. At the same time Border Carbon Adjustments (BCAs) are begining to be considered a necessary policy tool to address the carbon leakage and competitiveness concerns associated with emissions pricing systems. This confluence of events raises the question: is there a useful role for BCAs in the implementation of PTAs? This paper argues that the inclusion of BCAs in PTAs has several distinct advantages; it may avoid the trade retaliatory measures that could arise from the unilateral imposition of BCAs, it does not rely on cumbersome and often ineffective multilateral discussions, and it might be legally feasible as it provides a method of, to some extent, circumventing barriers to the unilateral imposition of BCAs posed by WTO rules. The paper also explores options for implementing BCAs in PTAs by looking at the importance of the BCA rate, the role of rules of origin, and the manner in which bilateral negotiations can be beneficial, even in cases where BCAs are, in the end, implemented unilaterally. The paper concludes that PTAs can indeed play a useful role in implementing BCAs, suggesting that this is a policy worth further exploration

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