Carbon control policies, competitiveness, and border tax adjustments
Several propositions have recently been made to use border tax adjustments (BTAs) to address the loss of competitiveness induced by unilateral stringent domestic pollution control policies. This paper explores in a general equilibrium framework the sectoral and welfare implications of a unilateral domestic GHG control policy combined with a BTA scheme. Using the Canadian economy as an illustration, we assess the extent to which BTAs achieve their objectives and analyze the impacts of different methods of recycling the BTA proceeds to support domestic industries. Our simulation results suggest that imposing BTAs on the imports of non-fossil and energy-intensive products reduces or removes completely the negative competitiveness impacts that domestic industries suffer from. The use of the proceeds of the BTAs to support domestic energy-intensive industries improves their competitiveness and, more importantly, in some cases, overprotects them, as it allows them to even increase their output in comparison to the benchmark without emissions control. Our results also shed light on the existence of heterogeneity in the composition of energy-intensive industries as far as the recycling method of the BTA proceeds is concerned. Energy-intensive industries that are more oriented toward the domestic market are better off with the recycling of the BTA proceeds towards gross output than towards exports alone. Finally, abstracting from the environmental benefits of reduced emissions, we find that a BTA entails a higher welfare cost to households.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ben Lockwood & John Whalley, 2008.
"Carbon Motivated Border Tax Adjustments: Old Wine in Green Bottles?,"
NBER Working Papers
14025, National Bureau of Economic Research, Inc.
- Ben Lockwood & John Whalley, 2010. "Carbon-motivated Border Tax Adjustments: Old Wine in Green Bottles?," The World Economy, Wiley Blackwell, vol. 33(6), pages 810-819, 06.
- Damien Demailly & Philippe Quirion, 2006.
"CO 2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: grandfathering versus output-based allocation,"
Taylor & Francis Journals, vol. 6(1), pages 93-113, January.
- Philippe Quirion & Damien Demailly, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: grandfathering versus output-based allocation," Post-Print hal-00119449, HAL.
- D. Demailly & P. Quirion, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: Grandfathering versus output-based allocation," Post-Print hal-00719269, HAL.
- Carraro, Carlo & Siniscalco, Domenico, 1991.
"Strategies for the International Protection of the Environment,"
CEPR Discussion Papers
568, C.E.P.R. Discussion Papers.
- Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
- Carolyn Fischer & Alan K. Fox, 2007. "Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions," Land Economics, University of Wisconsin Press, vol. 83(4), pages 575-599.
- Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
- Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999.
"The cost-effectiveness of alternative instruments for environmental protection in a second-best setting,"
Journal of Public Economics,
Elsevier, vol. 72(3), pages 329-360, June.
- Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
- Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Discussion Papers dp-98-22, Resources For the Future.
- Dissou Yazid, 2006. "Efficiency and Sectoral Distributional Impacts of Output-Based Emissions Allowances in Canada," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-33, September.
- Grossman, Gene M., 1980. "Border tax adjustments: Do they distort trade?," Journal of International Economics, Elsevier, vol. 10(1), pages 117-128, February.
- Kemfert, Claudia, 2004. "Climate coalitions and international trade: assessment of cooperation incentives by issue linkage," Energy Policy, Elsevier, vol. 32(4), pages 455-465, March.
- Meade, James E, 1974. "A Note on Border-Tax Adjustments," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 1013-15, Sept./Oct.
- Mustafa H. Babiker & Thomas F. Rutherford, 2005. "The Economic Effects of Border Measures in Subglobal Climate Agreements," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 99-126.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:33:y:2011:i:3:p:556-564. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.