Comparing Policies to Combat Emissions Leakage: Border Tax Adjustments versus Rebates
AbstractWe explore conditions determining which anti-leakage policies might be more effective complements to domestic greenhouse gas emissions regulation. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border tax on imports, a border rebate for exports, full border adjustment, and a domestic production rebate (as might be implemented with output-based allocation of emissions allowances). Each option faces different potential legal hurdles in international trade law; each also has different economic impacts. While all have the potential to support domestic production, none is necessarily effective at reducing global emissions. Nor is it possible to rank order the options. In each case, the effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes. We illustrate these results with simulations for the energy-intensive sectors of two different economies, the United States and Canada.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-09-02.
Date of creation: 15 Feb 2009
Date of revision:
environmental tax; rebate; border tax adjustment; emissions leakage; climate;
Find related papers by JEL classification:
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
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