Unilateral Carbon Taxes, Border Adjustments and Carbon Leakage

2012 ◽  
Author(s):  
Joshua Elliott ◽  
Ian Foster ◽  
Samuel S. Kortum ◽  
Gita Khun Jush ◽  
Todd Munson ◽  
...  
Keyword(s):  
Carbon Leakage ◽  
Carbon Taxes ◽  
Border Adjustments

Comments: Carbon Tariffs - Fair Incentives for Change?

2021 ◽  
Vol 73 (05) ◽  
pp. 8-8
Author(s):  
Pam Boschee
Keyword(s):  
Climate Change ◽  
Climate Policy ◽  
Global Climate ◽  
Carbon Price ◽  
Carbon Leakage ◽  
Carbon Taxes ◽  
Trading Systems ◽  
Climate Policies ◽  
The Eu ◽  
Carbon Tariff

Carbon credits, carbon taxes, and emissions trading systems are familiar terms in discussions about limiting global warming, the Paris Agreement, and net-zero emissions goals. A more recent addition to the glossary of climate policy is “carbon tariff.” While the concept is not new, it recently surfaced in nascent policymaking in the EU. In 2019, European Commission President Ursula von der Leyen proposed a “carbon border adjustment mechanism (CBAM)” as part of a proposed green deal. In March, the European Parliament adopted a resolution on a World Trade Organization (WTO)-compatible CBAM. A carbon tariff, or the EU’s CBAM, is a tax applied to carbon-intensive imports. Countries that have pledged to be more ambitious in reducing emissions—and in some cases have implemented binding targets—may impose carbon costs on their own businesses. Being eyed now are cross-border or overseas businesses that make products in countries in which no costs are imposed for emissions, resulting in cheaper carbon-intensive goods. Those products are exported to the countries aiming for reduced emissions. The concern lies in the risk of locally made goods becoming unfairly disadvantaged against competitors that are not taking similar steps to deal with climate change. A carbon tariff is being considered to level the playing field: local businesses in countries applying a tariff can better compete as climate policies evolve and are adopted around the world. Complying with WTO rules to ensure fair treatment, the CBAM will be imposed only on high-emitting industries that compete directly with local industries paying a carbon price. In the short term, these are likely to be steel, chemicals, fertilizers, and cement. The Parliament’s statement introduced another term to the glossary of climate policy: carbon leakage. “To raise global climate ambition and prevent ‘carbon leakage,’ the EU must place a carbon price on imports from less climate-ambitious countries.” It refers to the situation that may occur if businesses were to transfer production to other countries with laxer emission constraints to avoid costs related to climate policies. This could lead to an increase in total emissions in the higher-emitting countries. “The resolution underlines that the EU’s increased ambition on climate change must not lead to carbon leakage as global climate efforts will not benefit if EU production is just moved to non-EU countries that have less ambitious emissions rules,” the Parliament said. It also emphasized the tariff “must not be misused to further protectionism.” A member of the environment committee, Yannick Jadot, said, “It is a major political and democratic test for the EU, which must stop being naïve and impose the same carbon price on products, whether they are produced in or outside the EU, to ensure the most polluting sectors also take part in fighting climate change and innovate towards zero carbon. This will give us the best chance of remaining below the 1.5°C warming limit, whilst also pushing our trading partners to be equally ambitious in order to enter the EU market.” The Commission is expected to present a legislative proposal on a CBAM in the second quarter of 2021 as part of the European Green Deal.

The Role of Trade and Competitiveness Measures in US Climate Policy

2011 ◽  
Vol 101 (3) ◽  
pp. 258-262 ◽  
Author(s):  
Carolyn Fischer ◽  
Alan K Fox
Keyword(s):  
Climate Policy ◽  
Economic Efficiency ◽  
Carbon Leakage ◽  
Carbon Reduction ◽  
Climate Policies ◽  
Trade Offs ◽  
Trade Measures ◽  
Border Adjustments

We review the proposed measures for addressing competitiveness and carbon leakage concerns in recent US climate policy legislation. For eligible energy-intensive, trade-exposed sectors, output-based rebates would initially dampen cost increases; later, border adjustments would ensure that imports face comparable cost burdens. Both measures can in theory enhance the economic efficiency of carbon reduction efforts, but both pose some interesting economic and practical trade-offs. This paper discusses our recent research into the welfare and carbon leakage effects of using output-based allocation and trade measures in conjunction with climate policies.

BORDER ADJUSTMENTS SUPPLEMENTING A CAP AND TRADE SYSTEM TO COMBAT CLIMATE CHANGE

2019 ◽  
Vol 10 (04) ◽  
pp. 1950017
Author(s):  
MELANIE HECHT ◽  
WOLFGANG PETERS
Keyword(s):  
Climate Change ◽  
Carbon Taxes ◽  
Cap And Trade ◽  
National Treatment ◽  
Carbon Pricing ◽  
Treatment Principle ◽  
Combat Climate Change ◽  
Global Carbon ◽  
Carbon Prices ◽  
Border Adjustments

In the post-Paris Agreement era, the number of carbon pricing initiatives in order to combat climate change grows continuously. However, carbon prices vary substantially among countries which yields negative drawbacks in terms of carbon leakage and loss of competitiveness for firms producing in countries with more stringent regulations. Border adjustments (BAs) could help tackle these negative drawbacks through harmonizing carbon prices across countries. We model a two-stage game where Country A can choose whether to implement BAs in the first stage. In the second stage, producers from both countries compete over prices in Bertrand competition or over quantities in Cournot competition. Most analyses on BAs so far focus on carbon pricing in the form of carbon taxes. However, we observe that many governments achieve their mitigation targets by implementing a cap and trade system with some kind of free allocation of emission allowances. From the current global carbon pricing situation, we identify two conditions for the compliance with the WTO’s national treatment principle that have not been dealt with in detail in previous models: (i) the application of BAs in the form of a cap and trade system and (ii) accounting for free allocation of emission allowances. Our results show that irrespective of the competition type, BAs supplementing a cap and trade system with free allocation improve welfare if the competitive pressure is high.

A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS OF BORDER ADJUSTMENTS UNDER THE CAP-AND-TRADE SYSTEM: A CASE STUDY OF THE JAPANESE ECONOMY

2012 ◽  
Vol 03 (01) ◽  
pp. 1250003 ◽  
Author(s):  
SHIRO TAKEDA ◽  
HORIE TETSUYA ◽  
TOSHI H. ARIMURA
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Computable General Equilibrium Model ◽  
Carbon Leakage ◽  
Equilibrium Analysis ◽  
Japanese Economy ◽  
Iron And Steel ◽  
Adjustment Policy ◽  
Border Adjustments ◽  
Border Adjustment

Using a multi-region and multi-sector computable general equilibrium model, this paper evaluates the border adjustment policies of carbon regulations in Japan. We consider five types of border adjustments and examine their effects on the welfare, carbon leakage, and competitiveness of the Japanese energy-intensive trade-exposed (EITE) sectors. Our analysis shows that no single border adjustment policy is superior to the other policies in terms of simultaneously solving three primary issues: Welfare degradation, carbon leakage, and a loss of competitiveness in the EITE sectors. In addition, we show that export border adjustments are effective at restoring the competitiveness of Japanese exporters and reducing leakage. Our analysis also reveals that border adjustment in Japan significantly affects carbon leakage to China and the competitiveness of the iron and steel sectors. Finally, we show that border adjustments with and without consideration of indirect emissions have similar impacts, which indicates that the information regarding direct emissions is sufficient for implementing border adjustment in Japan.

scholarly journals Unilateral Carbon Taxes, Border Tax Adjustments and Carbon Leakage

2013 ◽  
Vol 14 (1) ◽  
Author(s):  
Joshua Elliott ◽  
Ian Foster ◽  
Sam Kortum ◽  
Gita Khun Jush ◽  
Todd Munson ◽  
...  
Keyword(s):  
Carbon Leakage ◽  
Carbon Taxes ◽  
Border Tax Adjustments

scholarly journals Green Procurement Decisions with Carbon Leakage by Global Suppliers and Order Quantities under Different Carbon Tax

2019 ◽  
Vol 11 (13) ◽  
pp. 3710 ◽  
Author(s):  
Rena Kondo ◽  
Yuki Kinoshita ◽  
Tetsuo Yamada
Keyword(s):  
Carbon Tax ◽  
Ghg Emissions ◽  
Electric Energy ◽  
Carbon Leakage ◽  
Carbon Taxes ◽  
Ghg Emission ◽  
Global Perspectives ◽  
Green Procurement ◽  
Order Quantities ◽  
Carbon Prices

Manufactures have been pressed to reduce greenhouse gas (GHG) emissions by environmental regulations and policies. Towards to reduction of GHG emissions, a carbon tax has been already introduced in 40 countries. Owing to different carbon prices among countries, there are potential risks of carbon leakage, where manufacturers transfer production operations to the countries with lower taxes to pursue lower costs. Moreover, procurement costs and GHG emissions vary by country because of economic conditions and electric energy mixes. Therefore, total GHG emissions could be globally reduced if manufactures relocate their production bases or switch suppliers in the country with lower GHG emission levels. This study proposes a green procurement decision for the supplier selection and the order quantity for minimizing GHG emission and costs considering the different carbon taxes in different countries. First, a bill of materials for each part is constructed through the life cycle inventory database with the Asian international input/output tables for a case study. Second, a green procurement decision considering the different carbon prices is formulated using integer programming. Finally, the results, including carbon leakage, are analyzed from the viewpoint of manufacturers, governments, and global perspectives.

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