The Politics of Carbon Leakage and the Fairness of Border Measures

The article critically examines domestic political concerns about the competitive disadvantages and possible carbon leakage arising from the introduction of domestic emission trading legislation and the fairness of applying carbon equalization measures at the border as a response to these concerns. I argue that the border adjustment measures proposed in the emissions trading bills that have been presented to Congress amount to an evasion of the U.S.'s leadership responsibilities under the United Nations Framework Convention on Climate Change (UNFCCC). I also show how the "level commercial playing field" justification for border measures that has dominated U.S. domestic debates is narrow and lopsided because it focuses only on the competitive disadvantages and direct carbon leakage that may flow from climate regulation while ignoring general shifts in the production and consumption of emissions in the global economy, which have enabled the outsourcing of emission to developing countries.

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