Carbon adjustment in a consumption-based emission inventory accounting: a CGE analysis and implications for a...

Because 'border carbon adjustment (BCA)' may violate the presently operational National Emission Inventory (NEI) accounting practised under the United Nations Framework Convention on Climate Change (UNFCCC) which is based on territorial production-based emission reduction responsibility approach, this study intends to investigate the implications of BCA imposition on the exports from a developing country under a territorial consumption-based alternative framework. With this alternative framework of accounting, the study assumes the BCA-burdened developing country to implement 'domestic carbon adjustment (DCA)' measures and experiments by applying a static 'computable general equilibrium (CGE)' modelling. The result from this study indicates that the closer the rates of BCA and the DCA, the more effective the carbon adjustment schemes are to reduce the emission intensity of energy use. The stricter carbon adjustment measures also found changing the energy consumption pattern of productive sectors by inducing the emission-intensive sectors to switch towards low-emission intensive natural gas. The study recommends the implementation of DCA measures for a developing country as stricter as compared to the foreign standards in a consumption-based framework to make the carbon adjustment initiatives more effective.