WT/CTE/W/258, G/C/W/839  
G/MA/W/184, G/TBT/W/777  
 
10 November  2023 
(23-7597) Page: 1/3 
Committee on Trade and Environment  
Council for Trade in Goods  
Committee on Market Access  
Committee on Technical Barriers to Trade  
  Original: English  
 
  
POLICY ISSUES FOR DEDICATED MULTILATERAL DISCUSSIONS  
ON BORDER CARBON ADJUSTMENT  
COMMUNICATION FROM CHINA  
The following communication, dated 10 November 2023, is being circulated at the request of the 
delegation of China.  
 
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In exploring trade policy responses to climate change, one type of policy focuses on carbon emissions 
associated with traded goods, making use of metrics of environmental policy instruments, such as 
carbon emissions, carbon intensity or c arbon footprint. It seeks to apply trade policy tools, such as 
tariffs or border adjustments, to account for such emissions. Some measures of such hybrid nature 
are being rolled out in a unilateral manner, despite a lack of sufficient evidence, discussion or 
consensus on certain fundamental issues. These measures have triggered considerable controversy 
and have been subject to trade concerns and discussions in the WTO Council for Trade in Goods, 
Committee on Market Access, Committee on Technical Barriers to  Trade and Committee on Trade 
and Environment, from different perspectives.  
Building on China's two previous proposals1, this communication focuses on one specific policy 
instrument, i.e. the border carbon adjustment (BCA), and proposes the following topi cs for dedicated 
multilateral discussions, to be held under the respective committees, as mandated, or under the 
multilateral deliberative mechanism on environmental sustainability, as proposed by several 
members.  
The proposed discussions are intended to strengthen the linkages between the multilateral trading 
system and sustainable development, so as to seek " both to protect and preserve the environment 
and to enhance the means of doing so in a manner consistent with their (Members') respective needs 
and concerns at different levels of economic development "2, and ensure that " there should not be, 
nor need be, any policy contradiction between upholding and safeguarding an open, 
non-discriminatory and equitable multilateral trading system on the one hand, a nd acting for the 
protection of the environment, and the promotion of sustainable development on the other ".3 
1  THE BASIC OPERATING MECHANISM  
1.1.  Carbon Leakage  – What is carbon leakage in the context of environmental policy? If there is 
gap in explicit carbon price between members, does it necessarily mean that there is a gap in the 
 
1 WT/CTE/W/251, A PROPOSAL FOR DEDICATED MULTILATERAL DISCUSSIONS ON THE TRADE 
ASPECTS AND IMPLICATIONS OF CERTAIN ENVIRONMENTAL MEASURES. Communication from China; 
JOB/TE/81, FURTHER ELABORATION ON DEDICATED MULTILATERAL DISCUSSIONS ON THE TRADE ASPECTS 
AND IMPLICATIONS OF CERTAIN ENVIRONMENTAL MEASURES. ENVIRONMENTAL MEASURES, Communication 
from China.  
2 Para. 1 of the preamble to the Marrakesh Agreement Establishing the World Trade Organization.  
3 Para 4. of the preamble to the 1994 Marrakesh Ministerial Decision on Trade and Environment.  WT/CTE/W/258 • G/C/W/839 • G/MA/W/184 • G/TBT/W/777  
 
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  overall stringency of their respective carbon emission control policies? Can carbon leakage be used 
as a basis to justify the BCA?4  
1.2.  Attribution  – How to objectively estimate the changes in the total amount and regional 
composition of global carbon emissions caused by the relocation of industries or import substitution? 
How to distinguish them from the changes in global carbon emissions caused by structural factors 
such as changes in the stage of economic development, the transition of the energy structure and 
the differences in factor endowments?  
1.3.  Extra -territorial implementation  – When a Member imposes BCA on imports, is it regulating 
domestic car bon emissions or extra -territorial carbon emissions?  
2  POLICY DESIGN  
2.1.  Applicable Scenarios for BCA  – Which types of domestic policy measures related to carbon 
emission controls are suitable to be adjusted at the border? Which types are better suited to 
intern ational coordination through multilateral approaches rather than a unilateral BCA? Are 
emission control measures on production facilities suitable for border adjustment?  
2.2.  WTO Conformity of BCA  – When implementing BCA, how to ensure that the basic WTO 
principles of MFN treatment and national treatment? Where there are differences in the policy 
designs between domestic carbon emission control measures and their corresponding BCA, how to 
ensure that the policy burden imposed by the BCA on imported products doe s not exceed that 
imposed by domestic measures on the like domestic products, so as to avoid distorting market 
competition?  
2.3.  Default values  – Default values for carbon emissions of imported goods seem to be a critical 
element in the policy design of BCA. Re garding setting the default values for extra -territorial carbon 
emissions, how to ensure the reliability of and minimize the time -lag in the database through 
effective cooperation with the members having appropriate jurisdiction, so as not to constitute 
arbitrary or disguised trade restrictions? What would be the basis to use the average emission 
intensity of the X% worst performing domestic enterprises plus certain markup as benchmark default 
values for emissions associated with imported goods?  
2.4.  Carbon pric e under BCA  – Is it reasonable to benchmark BCA against the carbon price in 
emission trading market, when such carbon market has the attribute of a financial market and the 
resulted carbon price embeds a financial premium?  
3  TRADE IMPACTS  
3.1.  Unilateral BCA  – In what ways and what areas will unilateral BCA impact other members' 
international trade and macro -economy? How can the impacts of BCA on members' trade be 
measured in an objective manner?  
3.2.  Carbon Club  – If a so -called Carbon Club, one that agrees to impose  punitive tariffs on non -
club members on grounds of differences in carbon intensity or carbon price, were formed to 
coordinate the implementation of BCA, what would be the impact on international trade?  
4  ENVIRONMENTAL EFFECTS  
4.1.  Nationally Determined Contribut ions (NDCs)  – What role will BCA play in a Member's 
achievement of its NDC under the Paris Agreement? In terms of extra -territorial carbon emissions, 
would targeted financial and technical assistance be better suited for reducing carbon intensity of 
import ed goods?  
4.2.  Use of revenues from BCA  – How should the revenues from BCA be used to better achieve 
the environmental goal of global carbon emissions reduction? For example, should it be used to 
 
4 A thought provoking paper on this subject is NORDSTRÖM, Håkan, "Does the risk of carbon leakage 
justify the CBAM?"(2023/ 08), https://cadmus.eui.eu/handle/1814/75367 . WT/CTE/W/258 • G/C/W/839 • G/MA/W/184 • G/TBT/W/777  
 
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  compensate developing members whose trade are affected by BCA, in order to enhance their 
capacity t o reduce carbon emissions?  
5  INCLUSIVENESS  
5.1.  Effective policy dialogues  – In designing and implementing BCA, how to make better use of 
multilateral platforms, such as the WTO, to promote effective policy dialogues with other members, 
on top of enhanced transpa rency? How should important factors identified in the course of the policy 
dialogues be taken into account in policy adjustments?  
5.2.  Diversity and flexibility  – When designing and implementing BCA, how should a Member 
fully acknowledge and take in account the  diverse range of mitigation efforts of other members, 
including but not limited to carbon pricing, effective carbon taxes, and other mechanisms that 
impose a price on carbon emissions?  
5.3.  Data reporting and mutual recognition  – As members have notable differ ences in the 
energy and industry structure, production processes, carbon accounting methods, reporting cycles 
and so on, how can the differences in data reporting be accommodated in an inclusive manner when 
implementing BCA, so as to avoid additional and u nnecessary costs to international trade? How can 
the mutual recognition of carbon emission data be realized in a scientific and reasonable manner?  
5.4.  The Principle of Common but Differential Responsibilities (CBDR)  – How can it be 
reflected in the design and implementation of BCA?  
5.5.  Disproportionate impacts by BCA on developing countries and SMEs  – How can the 
undesirable and disproportionate impacts of BCA be avoided for developing members that lack the 
infrastructure of carbon accounting, as well as for SMEs t hat have challenges in bearing the costs 
associated with data submission and third party verification?  
6  OTHER ARRANGEMENTS  
6.1.  Protection of submitted data  – BCA requires enterprises to submit carbon emissions and 
facility -specific data, some of which might be business sensitive or business confidential. If not duly 
protected, there is high risk of leaks, misuse or other type of data security issue. How to set the 
reasonable boundary for the data required? How to ensure the security of submitted data through 
institutional guardrails?  
6.2.  China welcomes contribution from other members with respect to additional policy issues 
regarding BCA as well as answers and solutions to these policy issues. We welcome written 
submissions by members and propose that the Secretariat  circulate a compilation of members' 
written submissions with a view to informing further multilateral discussions. We believe that 
multilateral, structured and engaged discussions on such policy issues would be conducive to 
collectively strengthening the multilateral trading system and enhancing the complementarity of 
trade policy and environmental sustainability.  
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