Adele Morris on Carbon Border Adjustments

The Morris Framework

Adele Morris has been one of the most active US academic voices on carbon-pricing policy for over two decades. Her Brookings work has consistently argued that the US could implement a carbon border adjustment more easily than a domestic carbon tax, because the political coalition for protecting US industry from foreign competition is broader than the coalition for raising domestic energy prices.

The EU CBAM Design

The European Union's Carbon Border Adjustment Mechanism entered its transition phase in October 2023 and goes to full implementation in 2026. The framework:

• Covered products initially: cement, iron, steel, aluminum, fertilizers, electricity, hydrogen. Expansion planned.
• Importers must report embedded emissions of covered products.
• From 2026, importers must purchase CBAM certificates priced at the EU ETS allowance price.
• Exports from countries with comparable carbon pricing receive proportional credit against the CBAM charge.
• Free allocations under the EU ETS for covered sectors are phased out over the same period.

The design is structurally elegant. It removes the competitive disadvantage European producers face under the EU ETS. It creates incentives for non-EU producers to either reduce emissions or face the equivalent charge at the border. It generates substantial revenue (estimated at €1-3 billion per year initially, growing with coverage expansion). And it maintains WTO compatibility through the parallel-treatment-of-imports construction.

The WTO Compatibility Question

The WTO framework permits border adjustments that mirror domestic taxes — a VAT on imports, for example, is generally permissible. The harder legal question is whether CBAM mirrors a "tax" in the WTO sense, or whether it is a regulatory measure that the WTO treats differently.

The EU has constructed CBAM to look like a tax. The certificates are priced like the EU ETS allowance. The documentation mirrors VAT-style border procedures. The framework treats domestic and imported products comparably on emissions basis. Whether the WTO's appellate body (currently in partial paralysis) would sustain this characterization is the open legal question.

Practical politics may matter more than legal theory. The WTO dispute-settlement system has been weakened by US blocking of Appellate Body appointments. Even if CBAM is challenged, the procedural delays may allow it to operate effectively before any decisive ruling. The de facto outcome may be a precedent for similar measures elsewhere regardless of formal WTO compatibility.

The Spillover Effects

CBAM has produced visible policy responses in major exporting countries:

China: announced an expansion of its own emissions trading system in 2024 partly because retaining carbon revenue domestically is preferable to ceding it to EU importers. The Chinese ETS now covers about 40% of national emissions and is expected to expand further.

Turkey: announced consideration of a domestic carbon price for the same reason. Turkish exports to the EU are substantial in covered categories (steel, cement), so the CBAM exposure is material.

India: signaled it may develop a carbon-pricing framework to avoid CBAM exposure. The political-economy obstacles in India are substantial, but the EU pressure has shifted the conversation.

South Africa, Brazil, and several smaller exporters have similarly begun discussions about domestic carbon pricing primarily because of CBAM rather than because of independent climate ambition.

The strategic logic is that CBAM gives non-EU countries an incentive to develop their own carbon pricing — not because they want to, but because it captures revenue that would otherwise flow to EU importers. This is the "ratcheting" mechanism that climate- policy designers have been seeking for decades: a way to extend carbon pricing globally without requiring international agreement.

What a US CBAM Would Look Like

Several US carbon-border-adjustment proposals have been introduced over the years:

The Coons-Cornyn proposal (2023): bipartisan framework that would charge imports based on their embedded emissions above a "carbon intensity benchmark" of US production. The structure addresses WTO concerns by treating US production at or above the benchmark similarly to imports.

The PROVE IT Act (2023): less aggressive proposal that would require Department of Energy assessment of embedded emissions of specific products and identify the US's competitive position. Diagnostic rather than action-forcing but useful preparation for later legislation.

The Whitehouse-Schatz proposals (multiple versions): more ambitious frameworks that pair a carbon tax with border adjustments. Have not advanced through Congress.

The Coons-Cornyn structure is the most politically viable. It does not impose a domestic carbon tax (which has consistently failed to pass Congress). It addresses the competitive concern that has been the primary obstacle to climate action in US heavy industry. And it generates revenue that can be recycled in politically durable ways.

Why It Has Not Materialized

Despite bipartisan academic support, no version of US carbon border adjustment has passed Congress. The obstacles:

• Some heavy-industry firms oppose any framework that would expose their own emissions to scrutiny.
• Free-trade advocates worry about precedent for unilateral trade measures.
• Some climate advocates view CBAM-only frameworks as politically expedient but inadequate to the climate-policy ambition required.
• Various jurisdictional disputes within Congress have slowed specific bills.
• The political signal that CBAM would be "good for US workers" has been undercut by alternative narratives.

The intellectual case for US adoption has been winning for years. The legislative case has not. The 2030s will determine whether the combination of EU pressure, Chinese and emerging-market policy shifts, and US industrial-policy momentum produces the political opening for US action.

The Developing-Country Concerns

Developing countries have raised substantial objections to CBAM. The framework charges imports without accounting for the historical emissions imbalance — wealthy countries built their economies on unconstrained emissions; CBAM imposes constraints on countries that did not. The fairness arguments are real but the policy has proceeded anyway.

The EU has offered partial accommodations: transition periods, technical assistance, exemptions for least-developed countries. These have not satisfied the major emerging-market objectors, but they have reduced the political backlash.

The Honest Reading

EU CBAM is the most consequential climate-trade policy innovation in decades. Its structural logic — extending carbon pricing globally through border adjustments rather than through international agreement — has produced visible policy responses in major exporting countries within two years of announcement. The framework's WTO compatibility, its distributional effects on developing countries, and its eventual expansion to finished goods are the open questions for the next decade. The US is under increasing pressure to develop a similar framework, both to capture revenue domestically and to align with European climate-trade architecture. The political coalition exists in academic and some policy circles; the legislative coalition has not coalesced. The next administration's choice on US CBAM will be one of the more consequential US climate-policy decisions of the late 2020s.

Reading List

• Adele Morris's Brookings carbon-pricing papers (ongoing)
• Center for Climate and Energy Solutions on CBAM design
• EU Commission CBAM technical documentation
• Niskanen Center on US carbon border adjustment proposals
• Climate Leadership Council policy briefs