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Competitiveness and Leakage Concerns and Border Carbon Adjustments

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  • Zhang, Zhong Xiang

Abstract

This paper provides a review of the literature on competitiveness and leakage concerns associated with differentiated climate abatement commitments among countries. The literature reviewed is not exhausted, but it is sufficient to provide a balanced view of both academics and policy circles. Section 2 discusses how to identify the sectors at a risk of carbon leakage. Section 3 examines ex ante estimates of potential carbon leakage rates, and explains why they differ from ex post results of environmental tax reforms and greenhouse gas emissions trading schemes that have been implemented in the European Union. Section 4 discusses broad policy options to address competitiveness and leakage concerns, and compares which anti-leakage policy, border adjustments or output-based allocation, is more effective to limiting carbon leakages or mitigating production loss in the sectors affected. Given that border carbon adjustment measures are incorporated in the U.S. proposed congressional climate bills to level the carbon playing field and could have potential conflicts with World Trade Organization (WTO) provisions and practical difficulties associated with their implementation, Section 5 discuses in great detail the WTO consistency, the effectiveness and methodological challenges of border carbon adjustment measures. The paper ends with some concluding remarks.

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File URL: http://dx.doi.org/10.1561/101.00000052
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Bibliographic Info

Article provided by now publishers in its journal International Review of Environmental and Resource Economics.

Volume (Year): 6 (2012)
Issue (Month): 3 (December)
Pages: 225-287

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Handle: RePEc:now:jirere:101.00000052

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Related research

Keywords: Emission trading; Competitiveness; Carbon leakage; Emissions allowance requirements; Carbon tariffs; Border carbon adjustments; Grandfathering; Output-based allocation; World Trade Organization;

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Citations

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Cited by:
  1. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2013. "The European Union Emissions Trading System : should we throw the flagship out with the bathwater ?," Working Papers hal-00866408, HAL.
  2. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2013. "The European Union Emissions Trading System : should we throw the flagship out with the bathwater ?," CIRED Working Papers hal-00866408, 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," Working Papers 2013.17, Fondazione Eni Enrico Mattei.
  4. Can Wang & Jie Lin & Wenjia Cab & ZhongXiang Zhang, 2014. "Policies and Practices of Low Carbon City Development in China," Working Papers 2014.09, Fondazione Eni Enrico Mattei.
  5. 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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