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How to design a border adjustment for the European Union Emissions Trading System ?

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  • Monjon, Stéphanie
  • Quirion, Philippe

Abstract

Border adjustments are currently discussed to limit the possible adverse impact of climate policies on competitiveness and carbon leakage. We discuss the main choices that will have to be made if the European Union implements such a system alongside the EU ETS. Although more analysis is required on some issues, on others some design options seem clearly preferable to others. First, the import adjustment should be a requirement to surrender allowances rather than a tax. Second, the general rule to determine the amount of allowances per ton imported should be the product-specific benchmarks that the European Commission is currently elaborating for a different purpose (i.e. to determine the amount of free allowances). Third, this obligation should apply when the imported product is registered at the EU border, and not after the end of the year as is the case for domestic emitters. Fourth, the export adjustment should take the form of a rebate on the amount of allowances a domestic emitter has to surrender. Five, this rebate should equal the above-mentioned product-specific benchmarks, not the emissions of the particular exporting plant or firm. Finally, the adjustment does not have to apply to consumer products but mostly to basic products.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7348.

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Date of creation: Sep 2010
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Publication status: Published in Energy Policy, 2010, Vol. 38, no. 9. pp. 5199-5207.Length: 8 pages
Handle: RePEc:dau:papers:123456789/7348

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Related research

Keywords: Carbon leakage; border adjustment; border tax adjustment; EU ETS; competitiveness;

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  1. ZhongXiang Zhang, 2010. "The U.S. Proposed Carbon Tariffs, WTO Scrutiny and China’s Responses," Working Papers, Fondazione Eni Enrico Mattei 2010.34, Fondazione Eni Enrico Mattei.
  2. van Asselt, Harro & Brewer, Thomas, 2010. "Addressing competitiveness and leakage concerns in climate policy: An analysis of border adjustment measures in the US and the EU," Energy Policy, Elsevier, Elsevier, vol. 38(1), pages 42-51, January.
  3. Aaditya Mattoo & Arvind Subramanian & Dominique van der Mensbrugghe & Jianwu He, 2009. "Reconciling Climate Change and Trade Policy," Working Paper Series, Peterson Institute for International Economics WP09-15, Peterson Institute for International Economics.
  4. repec:hal:wpaper:halshs-00009337 is not listed on IDEAS
  5. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, Springer, vol. 24(2), pages 137-164, October.
  6. Lars Mathiesen and Ottar Maestad, 2004. "Climate Policy and the Steel Industry: Achieving Global Emission Reductions by an Incomplete Climate Agreement," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 4), pages 91-114.
  7. 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, Elsevier, vol. 35(1), pages 497-506, January.
  8. Weber, Christopher L. & Peters, Glen P., 2009. "Climate change policy and international trade: Policy considerations in the US," Energy Policy, Elsevier, Elsevier, vol. 37(2), pages 432-440, February.
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