4. Border adjustments won’t solve warming and are a nightmare to implement

Border adjustments may also reduce the competitive pressure on industries to lower the carbon intensity of their operations and products versus manufacturers of similar products, as carbon content becomes less relevant to pricing.  Of course, consumers will still have an incentive to seek out substitutes to carbon-intensive goods, to the extent they’re available.  But the pressure on companies to become more carbon efficient versus their direct competition is diluted.

And it might be argued that by preserving jobs in fossil energy production and carbon-intensive manufacturing, border adjustments do ultimately help consumers.

“To the extent that we think that border adjustments are really preventing those industries from shifting out of the U.S., it's not really clear how much in the long-run you're going to stop those industries from having to retool anyway,” says Weisbach.  “It's not clear that border adjustments, by trying to continue to protect these industries from retooling are really doing something that's good for the U.S. in the long-run.”

“I think the supporters of border adjustments are the affected industries. They are the loudest voices out there, and they have an easy time making their views known in Washington. But nobody is out there speaking the American public generally.”

Competitive issues aside, Weisbach and Kortum found that border adjustments will be immensely complex and costly to implement.  Imagine the difficulty in calculating the carbon content of a car produced overseas. That car will have components produced by a number of suppliers, through a variety of methods and from a potentially dizzying array of source countries.

“The global supply chain is just too complex,” says Weisbach.  “There’s no way to impose a reasonably accurate border adjustment, and that’s why they’d be limited to simple fuels or steel.  Implementing on any comprehensive basis would be impossible, the cost would be overwhelming.”

“So border adjustments are crude and inaccurate, and then you induce problems because you’re not getting the incentives you want.”