This paper informs the discussion of carbon price policies by examining the potential for adverse impacts on domestic industries, with a focus on detailed sector-level analysis. The assumed policy scenario involves a unilateral economy-wide $10/ton CO2 charge without accompanying border tax adjustments or other complementary policies. Four modeling approaches are developed as a proxy for the different time horizons over which firms can pass through added costs, change input mix, adopt new technologies, and reallocate capital. Overall, we find that a readily identifiable set of industries experience particularly adverse impacts as measured by reduced output and that the relative burdens on different industries are remarkably consistent across the four time horizons. Output rebounds considerably over longer time horizons, and the adverse impacts on profits diminish even more rapidly in most cases. Over the short term employment losses mirror output declines, while gains in other industries fully offset the losses over the longer horizons. At the same time, leakage abroad is considerable in some sectors, particularly when reductions in exports are considered.
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Paper provided by Resources For the Future in its series Discussion Papers with number
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Find related papers by JEL classification: F14 - International Economics - - Trade - - - Country and Industry Studies of Trade D - Microeconomics D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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Arik Levinson & M. Scott Taylor, 2008.
"Unmasking The Pollution Haven Effect,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, 02.
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Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W.H. Parry & William A. Pizer, 2009.
"Designing Climate Mitigation Policy,"
NBER Working Papers
15022, National Bureau of Economic Research, Inc.
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