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Border Tax Adjustments: A feasible way to address nonparticipation in Emission Trading

Author

Listed:
  • Ismer, R.
  • Neuhoff, K.

Abstract

CO2 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.

Suggested Citation

  • Ismer, R. & Neuhoff, K., 2004. "Border Tax Adjustments: A feasible way to address nonparticipation in Emission Trading," Cambridge Working Papers in Economics 0409, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0409
    Note: CMI36, IO
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    File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep36.pdf
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    Citations

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    Cited by:

    1. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's GHG Emissions [Instrument choice: the pros and cons of alternative policy instruments]," Papers WP284, Economic and Social Research Institute (ESRI).
    2. Angus Johnston, 2006. "Free allocation of allowances under the EU emissions trading scheme: legal issues," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 115-136, January.
    3. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.
    4. Reyno Seymore & Margaret Mabugu & Jan van Heerden, 2010. "Border Tax Adjustments to Negate the Economic Impact of an Electricity Generation Tax," Working Papers 201003, University of Pretoria, Department of Economics.
    5. Löschel, Andreas & Alexeeva-Talebi, Victoria & Mennel, Tim, 2008. "Climate Policy and the Problem of Competitiveness: Border Tax Adjustments or Integrated Emission Trading?," ZEW Discussion Papers 08-061, ZEW - Leibniz Centre for European Economic Research.
    6. Stuart Evans & Michael A. Mehling & Robert A. Ritz & Paul Sammon, 2021. "Border carbon adjustments and industrial competitiveness in a European Green Deal," Climate Policy, Taylor & Francis Journals, vol. 21(3), pages 307-317, March.
    7. Peters, Glen P., 2008. "From production-based to consumption-based national emission inventories," Ecological Economics, Elsevier, vol. 65(1), pages 13-23, March.
    8. Weber, Christopher L. & Peters, Glen P., 2009. "Climate change policy and international trade: Policy considerations in the US," Energy Policy, Elsevier, vol. 37(2), pages 432-440, February.
    9. Biswajit Dhar & Kasturi Das, 2009. "The European Union’s Proposed Carbon Equalization System : Can it be WTO Compatible?," Trade Working Papers 22780, East Asian Bureau of Economic Research.
    10. Fischer, Carolyn & Fox, Alan K., 2009. "Comparing Policies to Combat Emissions Leakage: Border Tax Adjustments versus Rebates," RFF Working Paper Series dp-09-02, Resources for the Future.
    11. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2013. "Sectors under scrutiny � Evaluation of indicators to assess the risk of carbon leakage in the UK and Germany," GRI Working Papers 113, Grantham Research Institute on Climate Change and the Environment.
    12. Li, Aijun & Zhang, Aizhen & Cai, Hongbo & Li, Xingfeng & Peng, Shishen, 2013. "How large are the impacts of carbon-motivated border tax adjustments on China and how to mitigate them?," Energy Policy, Elsevier, vol. 63(C), pages 927-934.
    13. Demailly, Damien & Quirion, Philippe, 2008. "Changing the Allocation Rules in the EU ETS: Impact on Competitiveness and Economic Efficiency," Climate Change Modelling and Policy Working Papers 46623, Fondazione Eni Enrico Mattei (FEEM).
    14. Marques, Alexandra & Rodrigues, João & Lenzen, Manfred & Domingos, Tiago, 2012. "Income-based environmental responsibility," Ecological Economics, Elsevier, vol. 84(C), pages 57-65.
    15. Low, Patrick & Marceau, Gabrielle & Reinaud, Julia, 2011. "The interface between the trade and climate change regimes: Scoping the issues," WTO Staff Working Papers ERSD-2011-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. R. Seymore & M. Mabugu & J. H. van Heerden, 2012. "The Welfare Effects of Reversed Border Tax Adjustments as a Remedy under Unilateral Environmental Taxation," Energy & Environment, , vol. 23(8), pages 1209-1220, December.
    17. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9, June.
    18. Mehdi Abbas, 2007. "Taxe CO2 aux frontières, régime commercial multilatéral et lutte contre le changement climatique," Post-Print halshs-00168960, HAL.
    19. Flores, José Luis, 2014. "Políticas climáticas en países desarrollados: impacto en América Latina," Documentos de Proyectos 37611, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    20. Lin, Boqiang & Li, Aijun, 2011. "Impacts of carbon motivated border tax adjustments on competitiveness across regions in China," Energy, Elsevier, vol. 36(8), pages 5111-5118.
    21. van Asselt, Harro & Biermann, Frank, 2007. "European emissions trading and the international competitiveness of energy-intensive industries: a legal and political evaluation of possible supporting measures," Energy Policy, Elsevier, vol. 35(1), pages 497-506, January.
    22. Jansson, Torbjorn & Kuiper, Marijke & Banse, Martin & Heckelei, Thomas & Adenäuer, Marcel, 2008. "Getting the best of both worlds? Linking CAPRI and GTAP for an economywide assessment of agriculture," Conference papers 331757, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    Keywords

    Border Tax; Emission Trading; WTO law; International trade;
    All these keywords.

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, 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

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