Getting the carbon price right through climate border measures: a Chinese perspective

Border carbon adjustment (BCA) has had a high profile in climate and trade talks, due to differences between the EU and China. Much of the debate has revolved around the possibility of EU taxation on Chinese exported products in order to both avoid carbon leakage and support the EU's unilateral efforts to curb CO 2 emissions. This article examines the motives behind the rejection of BCA by Chinese officials. In addition to the conventional argument that BCA is inefficient and unfair, new explanations are provided for China's stance. First, China claims that its exports of energy-intensive products are already taxed, with the CO 2 e price for Chinese export taxation averaging European Union Emissions Trading Scheme CO 2 price levels. Second, the EU trade dispute concerning Chinese export restrictions - occurring just a few years after disputes concerning the subsidization of similar products - provides evidence that the EU's stance on trade issues is incoherent, casting doubt on its willingness to genuinely get the carbon price right for products entering its market. Finally, BCA options contemplated by Annex I countries unilaterally convey the signal that China is perpetually falling short of international standards and of sharply increasing responsibilities.