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Trade effects of alternative carbon border-tax schemes

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  • Aaditya Mattoo

    ()

  • Arvind Subramanian

    ()

  • Dominique Mensbrugghe

    ()

  • Jianwu He

    ()

Abstract

In industrial countries contemplating emissions reductions, there have been calls for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high-income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 15 %; the corresponding declines in real income would be 3.7 and 2.4 %. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high-income countries and less adversely affect developing country trade. Copyright Kiel Institute 2013

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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 149 (2013)
Issue (Month): 3 (September)
Pages: 587-609

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Handle: RePEc:spr:weltar:v:149:y:2013:i:3:p:587-609

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Related research

Keywords: Environment; Climate change; Trade; Trade policy; F13; F18; H23; Q56;

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References

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  1. Yan Dong & John Walley, 2012. "How Large Are The Impacts Of Carbon Motivated Border Tax Adjustments?," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1250001-1-1.
  2. Ho, Mun S. & Morgenstern, Richard & Shih, Jhih-Shyang, 2008. "Impact of Carbon Price Policies on U.S. Industry," Discussion Papers dp-08-37, Resources For the Future.
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  9. Peterson, Everett B. & Schleich, Joachim, 2007. "Economic and environmental effects of border tax adjustments," Working Papers "Sustainability and Innovation" S1/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
  10. Grubb, M. & Neuhoff, K., 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Cambridge Working Papers in Economics 0645, Faculty of Economics, University of Cambridge.
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