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Border tax adjustments in the climate policy context: CO2 versus broad-based GHG emission targeting

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Author Info

  • Ghosh, Madanmohan
  • Luo, Deming
  • Siddiqui, Muhammad Shahid
  • Zhu, Yunfa

Abstract

Using a multi-region, multi-sector computable general equilibrium (CGE) model, this paper compares the efficiency, distributional and emission leakage effects of border tax adjustments (BTAs) as part of unilateral climate policies that are based on carbon dioxide (CO2)-only versus those based on all greenhouse gases (GHGs). Simulation results suggest that the broad-based GHG policies in general have lower efficiency costs and result in less re-distributive effects. BTAs bring modest efficiency gains with adverse distributional consequences. The distributional impacts are smaller under broad-based GHG policies compared to that based on CO2 only. However, these are due to a wider variety of abatement options under multi-gas policies rather than the BTAs per se. The main difference between the two policies is distributional effects. First, CO2-only based policies have worse impacts on fossil fuel exporters such as Russia and relatively better outcomes for oil importers such as India and China, compared to that of multi-gas policies particularly when it involves large global emission reduction. Second, sectoral coverage under BTAs also influences the differential outcomes. For example, Brazil is worse impacted under GHG-based policies if agriculture is brought under BTAs as two-third of its emissions are non-CO2 based and agriculture is the primary source of these emissions.

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File URL: http://www.sciencedirect.com/science/article/pii/S0140988312002198
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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): S2 ()
Pages: S154-S167

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:s2:p:s154-s167

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Carbon leakage; Border tax adjustments (BTAs); Competitiveness;

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Cited by:
  1. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2013. "Carbon-based Border Tax Adjustments and China’s International Trade: Analysis based on a Dynamic Computable General Equilibrium Model," Working Papers 2013.17, Fondazione Eni Enrico Mattei.
  2. Frédéric Branger & Philippe Quirion, 2013. "Would Border Carbon Adjustments prevent carbon leakage and heavy industry competitiveness losses? Insights from a meta-analysis of recent economic studies," CIRED Working Papers halshs-00870689, HAL.
  3. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2013. "Carbon-based Border Tax Adjustments and China’s International Trade: Analysis based on a Dynamic Computable General Equilibrium Model," CCEP Working Papers 1301, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.

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