Carbon tariff

A carbon tariff or border carbon adjustment is an eco-tariff on embedded carbon. The aim is generally to prevent carbon leakage from states without a carbon price. Examples of imports which are high-carbon and so may be subject to a carbon tariff are electricity generated by coal-fired power stations, iron and steel from blast furnaces, and fertilizer from the Haber process.
Currently, only California applies a BCAfor electricitywhile the European Union and the United Kingdom will apply BCAs from 2026 and 2027, respectively. Several other countries and territories with emissions pricing are considering them.

Existing and forthcoming

European Union

United Kingdom

California

The California Cap-and-Trade Program has a carbon border adjustment mechanism for imported electricity since 2011, and is required to report to the Legislature in 2025 on a potential extension of border adjustment to physical products.

WTO rule compatibility

Current WTO rules may prohibit some types of carbon border adjustment. In 2024, the United States Democrats stated that carbon border adjustment does not amount to a carbon tax but instead to a fee that is permissible under World Trade Organization rules,. The WTO itself has not come to a conclusion.