This study examines the relationship between unilateral carbon pricing and global trade, focusing on the role of border adjustments in mitigating the competitive disadvantages arising from the Australian carbon tax. As part of Australia's climate change mitigation strategy, the carbon tax was implemented to reduce greenhouse gas emissions by taxing carbon-intensive goods. However, concerns arose about the potential for "carbon leakage," where businesses in carbon-taxed regions may lose competitiveness against foreign companies from countries without similar carbon pricing. Border adjustments, such as carbon tariffs or rebates, were proposed as a mechanism to address this issue. This research evaluates the economic, environmental, and trade implications of border adjustments in the context of the Australian carbon tax, considering international trade agreements, WTO rules, and the effectiveness of such policies in achieving both environmental and economic objectives. The study finds that while border adjustments can help level the playing field for domestic industries, they pose challenges in terms of international relations and compliance with global trade laws. Ultimately, the research suggests that a balanced approach, involving international cooperation on carbon pricing and strategic use of border adjustments, is key to achieving global climate goals without undermining trade relations.

Unilateral carbon pricing, Australian carbon tax, Border adjustments

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