Political economy of border carbon adjustment

If the issue of climate change should lead the international community to act jointly in order to tackle it, we observe in reality diverging levels of effort. Pricing carbon is recognized as the cornerstone economic policy to shift emissions efficiently and has been implemented unilaterally in several jurisdictions. This desynchronization between world countries in the implementation of such policies can lead to pervasive effects such as carbon leakage, which can be countered by taxing imported emissions through border carbon adjustment. This leads to redistributive effects among final consumers that are different to those induced by domestic carbon pricing schemes and which, when associated to revenues recycling schemes, lower the burden of carbon pricing policy on households and eventually limit the share of net contributors to a carbon pricing policy.