Trade, climate change and the political game theory of border carbon adjustments

Date: 01 June 2012

The lack of real progress at the Durban climate change conference in 2011—postponing effective action until at least 2020—has many causes, one of which is the failure to address trade issues and, in particular, carbon leakage. This paper advances two arguments. First, it argues that the conventional view of Border Carbon Adjustments (BCAs) as a ‘dirty’ trade barrier should be turned on its head. Rather, the absence of a carbon price comprises an implicit subsidy to dirtier production in non-regulated markets. Second, BCAs could act as a game-changer when climate policy negotiations move at a glacial pace, if at all. Materially stronger progress could be achieved indirectly from the threat of unilateral trade policies. The paper shows how this could come about, using a simple political game theory model.

Cameron Hepburn Dieter Helm Giovanni Ruta

Economics of Sustainability

Economics of Sustainability

Trade, climate change, and the political game theory of border carbon adjustments


Type: paper

Helm, D., Hepburn, C. & Ruta, G. (2012). 'Trade, climate change, and the political game theory of border carbon adjustments'. Oxford Review of Economic Policy, 28(2), pp.368-394.


View Document