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The Impact of Border Carbon Adjustments under Alternative Producer Responses

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  • Winchester, Niven

Abstract

Border carbon adjustments (BCAs) have been proposed to address leakage and competitiveness concerns. In traditional assessments, firms regard BCAs as output taxes rather than implicit emissions taxes. Using a stylized energy-economic model, we analyze the impact of BCAs for alternative producer responses. When firms view BCAs as an implicit emissions tax, the outcome depends on whether or not firms can differentiate production across destination markets. If firms are able to produce a lowemissions variety for regions imposing BCAs, results are similar to when firms regard BCAs as an output tax. If firms produce a single variety for all markets, BCAs result in larger leakage reductions than in standard approaches. We also find that BCAs are less effective at addressing competitive concerns in scenarios that result in larger leakage reductions.

Suggested Citation

  • Winchester, Niven, 2011. "The Impact of Border Carbon Adjustments under Alternative Producer Responses," Conference papers 332159, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332159
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    File URL: https://ageconsearch.umn.edu/record/332159/files/5233.pdf
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    Cited by:

    1. Böhringer, Christoph & Fischer, Carolyn & Rosendahl, Knut Einar, 2014. "Cost-effective unilateral climate policy design: Size matters," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 318-339.
    2. Böhringer, Christoph & Bye, Brita & Fæhn, Taran & Rosendahl, Knut Einar, 2017. "Targeted carbon tariffs: Export response, leakage and welfare," Resource and Energy Economics, Elsevier, vol. 50(C), pages 51-73.
    3. Edward J. Balistreri & Daniel T. Kaffine & Hidemichi Yonezawa, 2019. "Optimal Environmental Border Adjustments Under the General Agreement on Tariffs and Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1037-1075, November.
    4. Böhringer, Christoph & Bye, Brita & Fæhn, Taran & Rosendahl, Knut Einar, 2012. "Alternative designs for tariffs on embodied carbon: A global cost-effectiveness analysis," Energy Economics, Elsevier, vol. 34(S2), pages 143-153.
    5. Böhringer, Christoph & Rutherford, Thomas, 2017. "Paris After Trump: An Inconvenient Insight," Conference papers 332843, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Irfanoglu, Zeynep Burcu & Golub, Alla A. & Hertel, Thomas W. & Henderson, Benjamin B., 2012. "Effects of carbon-based border tax adjustments on carbon leakage and competitiveness in livestock sectors," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125006, Agricultural and Applied Economics Association.
    7. Jared C. Carbone & Nicholas Rivers, 2014. "Climate policy and competitiveness: Policy guidance and quantitative evidence," Working Papers 2014-05, Colorado School of Mines, Division of Economics and Business.
    8. Madison Condon & Ada Ignaciuk, 2013. "Border Carbon Adjustment and International Trade: A Literature Review," OECD Trade and Environment Working Papers 2013/6, OECD Publishing.
    9. Ghosh, Madanmohan & Luo, Deming & Siddiqui, Muhammad Shahid & Zhu, Yunfa, 2012. "Border tax adjustments in the climate policy context: CO2 versus broad-based GHG emission targeting," Energy Economics, Elsevier, vol. 34(S2), pages 154-167.
    10. Niven Winchester, 2018. "Can tariffs be used to enforce Paris climate commitments?," The World Economy, Wiley Blackwell, vol. 41(10), pages 2650-2668, October.
    11. Zhang, Zengkai & Zhu, Kunfu & Hewings, Geoffrey J.D., 2017. "The effects of border-crossing frequencies associated with carbon footprints on border carbon adjustments," Energy Economics, Elsevier, vol. 65(C), pages 105-114.
    12. Sakai, Marco & Barrett, John, 2016. "Border carbon adjustments: Addressing emissions embodied in trade," Energy Policy, Elsevier, vol. 92(C), pages 102-110.

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