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Designing A Globally Acceptable Carbon Tax Scheme To Address Competitiveness And Leakage Concerns

Author

Listed:
  • LEI ZHU

    (School of Economics and Management, Beihang University, Beijing 100191, P. R. China)

  • LIANBIAO CUI

    (#x2020;School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu 233030, P. R. China)

  • JOACHIM SCHLEICH

    (#x2021;Department of Management, Technology and Innovation, Grenoble Ecole de Management, 12 rue Pierre Sémard, 38000 Grenoble, France§Department of Energy Policy and Energy Markets, Fraunhofer Institute of Systems and Innovation Research, Breslauer Strae 48, 76139 Karlsruhe, Germany)

Abstract

To address competitiveness and leakage concerns in international climate policy, this paper proposes a differentiated carbon tax scheme (DCT), which largely preserves the relative competitive positions of developed and developing countries. The paper first presents a theoretical model from which to derive the DCT. Then, employing a global trade analysis model, competitiveness and leakage effects under a DCT are simulated and contrasted to those of a unilateral carbon tax, a carbon tariff, and a uniform carbon tax. The results of our analysis suggest that: (1) under the proposed DCT, emission reductions in developed and developing countries are higher and leakage is lower than under a carbon tariff; (2) the DCT has weaker competitiveness effects than a carbon tariff; and (3) the DCT is more favorable to developing countries’ output and welfare than a carbon tariff or a uniform global carbon tax. Developing countries may therefore embrace a DCT as an intermediate step towards the implementation of a global carbon tax.

Suggested Citation

  • Lei Zhu & Lianbiao Cui & Joachim Schleich, 2020. "Designing A Globally Acceptable Carbon Tax Scheme To Address Competitiveness And Leakage Concerns," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 1-21, May.
    • Handle: RePEc:wsi:ccexxx:v:11:y:2020:i:02:n:s2010007820500086
    DOI: 10.1142/S2010007820500086
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    Cited by:

    1. Banerjee, Suvajit, 2021. "Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 68-86.

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