Question 1

What is a carbon border adjustment mechanism?

Accepted Answer

A **carbon border adjustment mechanism (CBAM)** charges imports according to the emissions produced making them, so that goods from countries with weaker climate policy do not undercut domestic producers paying a carbon price.

**The problem it addresses: carbon leakage.** If one country prices carbon and its trading partners do not, two things can happen:

**Production relocates** to jurisdictions without a carbon price.

**Domestic producers lose market share** to cheaper imports.

In both cases global emissions do not fall — they **move**, while the country imposing the policy loses industry and gets no climate benefit. That outcome undermines the political sustainability of carbon pricing entirely, which is why leakage is taken seriously.

**How a CBAM works.** Importers must report the **embedded emissions** in covered goods and surrender certificates priced against the domestic carbon price. Where the exporting country already charged a carbon price, that is deducted — so the mechanism equalises rather than double-charges.

**The EU CBAM** is the leading example, entering a reporting-only transitional phase from October 2023 with financial obligations phasing in subsequently, alongside the phase-out of free allowances under the EU Emissions Trading System. It covers **iron and steel, aluminium, cement, fertilisers, electricity and hydrogen** — chosen as carbon-intensive and trade-exposed. The **UK has announced its own**, on a comparable basis.

**The arguments for it:** it preserves the integrity of domestic carbon pricing, removes the incentive to offshore emissions, and creates pressure for exporting countries to introduce their own carbon prices — since the revenue then stays with them rather than going to the importer.

**The criticisms, which are substantial:**

**Protectionism.** Several developing countries and major exporters argue it is a trade barrier dressed as climate policy, and WTO compatibility has been contested.

**Equity.** It applies the same standard to countries with very different historical responsibility and capacity.

**Administrative burden**, particularly for smaller exporters lacking emissions data.

**Measurement difficulty** for complex supply chains.

Question 2

What is the difference between a carbon tax and an emissions trading scheme?

Accepted Answer

Which variable is fixed. A carbon tax fixes the price and lets emissions find their level; a trading scheme fixes the quantity of emissions and lets the price find its level. Both put a cost on

Question 3

What is the social cost of carbon?

Accepted Answer

An estimate, in money, of the damage caused by emitting one additional tonne of carbon dioxide — used to put climate effects into cost-benefit analysis of policies and projects. Why it exists.

Question 4

What is a carbon offset and do they actually work?

Accepted Answer

A carbon offset is a credit representing one tonne of CO₂ either removed from the atmosphere or prevented from being emitted somewhere else, bought to compensate for emissions you produced. The types

Question 5

What are scope 1, 2 and 3 emissions?

Accepted Answer

A classification of an organisation's greenhouse gas emissions by where they occur relative to the organisation, established by the Greenhouse Gas Protocol and now the standard framework for

Question 6

What is the difference between climate mitigation and adaptation?

Accepted Answer

Mitigation reduces the cause. Adaptation reduces the harm. Both are necessary, and treating them as alternatives is a mistake that has cost real time. Mitigation means limiting climate change itself

Question 7

What is a just transition?

Accepted Answer

The principle that moving away from fossil fuels should not impose the costs on the workers and communities that depend on them — and that a transition perceived as unfair will be resisted, whatever

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