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

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Author Info

  • 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.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0409.

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Length: 42
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:cam:camdae:0409

Note: CMI36, IO
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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: Border Tax; Emission Trading; WTO law; International trade;

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Cited by:
  1. 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 - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. 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).
  3. 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.
  4. Fischer, Carolyn & Fox, Alan K., 2009. "Comparing Policies to Combat Emissions Leakage: Border Tax Adjustments versus Rebates," Discussion Papers dp-09-02, Resources For the Future.
  5. 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.
  6. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9.
  7. Biswajit Dhar & Kasturi Das, 2009. "The European Union’s Proposed Carbon Equalization System : Can it be WTO Compatible?," Development Economics Working Papers 22989, East Asian Bureau of Economic Research.
  8. Mehdi Abbas, 2007. "Taxe CO2 aux frontières, régime commercial multilatéral et lutte contre le changement climatique," Post-Print halshs-00168960, HAL.
  9. 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.
  10. 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.
  11. Peters, Glen P., 2008. "From production-based to consumption-based national emission inventories," Ecological Economics, Elsevier, vol. 65(1), pages 13-23, March.

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