Report on the efficiency, feasibility, and effectiveness of various BTA designs

The ENTRACTE research project aims to analyse the European climate policy portfolio with special emphasis on the role of interactions between different policy instruments. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

This report examines the effectiveness of different Border Carbon Adjustment (BCA) designs implemented by the EU, based on two studies using different computable general equilibrium (CGE) models of the world economy. The two models are either new or substantially modified, and they are calibrated based on different global datasets. In one study firm-targeted carbon tariffs are examined and compared with region-specific tariffs. In the other study tariffs based on direct emissions only are compared with tariffs based on the whole embodied carbon content. The results of both studies show that the design of the BCA scheme matters for its efficiency and effectivity on restoring competitiveness.

Author: Knut Einar Rosendahl, Oliver Schenker