Border Tax Adjustments: A feasible way to address nonparticipation in Emission Trading
AbstractCO2 emission certificates internalise effects of fossil fuel consumption on global climate and sea levels. If they are only implemented in some countries, then their effectiveness is limited; Consumption, production and investment decisions do not reach the optimal allocation, production with inefficient technologies in non-participating countries can even be increased. Furthermore industry lobbying might result in limited application of CO2 emission certificates or less ambitious reduction targets. Border tax adjustment at the level of additional costs incurred for procurement of CO2 emission permits during production of processed materials using best available technology limits the distortions. We show that it can be compatible with WTO constraints. Crucial features of a practicable implementation are simplicity achieved by a focus on the CO2 emissions caused by processed materials and a separate treatment of electric energy input to take account of regionally varying fuel mixes.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0409.
Date of creation: Jan 2004
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Note: CMI36, IO
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Border Tax; Emission Trading; WTO law; International trade;
Find related papers by JEL classification:
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-01 (All new papers)
- NEP-ENV-2004-02-01 (Environmental Economics)
- NEP-LAW-2004-02-01 (Law & Economics)
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