There are two related issues of concern for countries taking on climate action. The first one is that some of their domestic industrial production will lose competitiveness; the second is that part of their efforts will be undermined by an increase in greenhouse gas emissions elsewhere, or “carbon leakage”. While the debate over protective measures continues focusing largely on carbon-based border tax adjustments (BTAs), Christa Clapp, Jean Chateau and Rob Dellink, economists at OECD, investigate several issues in the debate and focus on how and why BTAs fail to protect domestic industry, may reduce carbon leakage from the competitiveness channel and have cost and additional complications.
