BCA’s cause trade disputes – their use as a sanctioning instrument are protectionist and discriminatory.
Bohringer et.al 22 (Christoph Böhringer, is Professor of Economic Policy at the University of Oldenburg. Carolyn Fischer, is an environmental economist. Knut Einar Rosendahl, is a Professor at Norwegian University of Life Sciences. Thomas Rutherford, is an Professor in applied economist working on issues in trade, energy and environmental economics. 2022 “Potential impacts and challenges of border carbon adjustments” https://research.vu.nl/ws/portalfiles/portal/160079914/Potential_impacts_and_challenges_of_border_carbon_adjustments.pdf pg.27)//BH-NB//
BCA proposals have been floated not only as a measure to combat leakage but also as a means to secure greater cooperation: to avoid tariffs, other nations could adopt equivalent emissions pricing73,74. The terms-of-trade effect establishes the economic rationale of BCA as a sanctioning instrument. Numerical simulation studies that incorporate the strategic behaviour of individual countries suggest that import adjustments could coerce a broader international cooperation in emissions pricing under certain conditions75–77. When cast more broadly as uniform percentage tariffs on the imports of outsiders, a carbon club may even induce a large, stable coalition with high levels of abatement78. In this vein, a climate club that combines emissions pricing with trade sanctions could be a game changer. However, such sanctions are more likely than BCA to conflict with WTO obligations and induce trade disputes. Recent economic analyses show that the additional consideration of retaliation significantly reduces the appeal of import adjustments as a means to expand climate coalitions and may even risk a detrimental trade war79,80
From a legal perspective, import charges in WTO-compatible BCAs may not be sufficient to bring many pollution-intensive countries into a carbon-pricing coalition51,78. Moreover, the use of BCA as leverage for country-specific actions, as opposed to leakage prevention, could violate common but differentiated responsibilities principles. In international climate negotiations, BCAs could lead countries to reduce their voluntary commitments under the Paris Agreement, which would undermine the strategic value of BCA as a sanctioning instrument. China, as a prime example, responded to the EU’s proposal for import adjustments by saying such a policy would seriously undermine international efforts to fight global warming; other large non-OECD countries, such as India, Indonesia and Thailand, share the view that BCA is a protectionist and discriminatory policy measure that they will oppose81.