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The role of border carbon adjustment in unilateral climate policy: Overview of an Energy Modeling Forum study (EMF 29)

Listed author(s):
  • Böhringer, Christoph
  • Balistreri, Edward J.
  • Rutherford, Thomas F.

Issues of emission leakage and competitiveness are at the fore of the climate policy debate in all the major economies implementing or proposing to implement substantial emission cap-and-trade programs. Unilateral climate policy cannot directly impose emission prices on foreign sources, but it can complement domestic emission pricing with border carbon adjustment to reduce leakage and increase global cost-effectiveness. While border carbon adjustment has a theoretical efficiency rationale, its practical implementation is subject to serious caveats. This article summarizes the results of an Energy Modeling Forum study (EMF 29) on the efficiency and distributional impacts of border carbon adjustment. We find that border carbon adjustment can effectively reduce leakage and ameliorate adverse impacts on energy-intensive and trade-exposed industries of unilaterally abating countries. However, the scope for global cost savings is small. The main effect of border carbon adjustment is to shift the economic burden of emission reduction to non-abating countries through implicit changes in international prices.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): S2 ()
Pages: 97-110

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:s2:p:s97-s110
DOI: 10.1016/j.eneco.2012.10.003
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Alexeeva-Talebi, Victoria & Böhringer, Christoph & Löschel, Andreas & Voigt, Sebastian, 2012. "The value-added of sectoral disaggregation: Implications on competitive consequences of climate change policies," Energy Economics, Elsevier, vol. 34(S2), pages 127-142.
  2. Christoph Böhringer & Jared C. Carbone & Thomas F. Rutherford, 2011. "Embodied Carbon Tariffs," NBER Working Papers 17376, National Bureau of Economic Research, Inc.
  3. Springmann, Marco, 2012. "A look inwards: Carbon tariffs versus internal improvements in emissions-trading systems," Energy Economics, Elsevier, vol. 34(S2), pages 228-239.
  4. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  5. repec:zbw:hohpro:345 is not listed on IDEAS
  6. Edward J. Balistreri & Thomas F. Rutherford, 2012. "Subglobal Carbon Policy and the Competitive Selection of Heterogeneous Firms," Working Papers 2012-01, Colorado School of Mines, Division of Economics and Business.
  7. Caron, Justin, 2012. "Estimating carbon leakage and the efficiency of border adjustments in general equilibrium — Does sectoral aggregation matter?," Energy Economics, Elsevier, vol. 34(S2), pages 111-126.
  8. Böhringer, Christoph & Carbone, Jared C. & Rutherford, Thomas F., 2012. "Unilateral climate policy design: Efficiency and equity implications of alternative instruments to reduce carbon leakage," Energy Economics, Elsevier, vol. 34(S2), pages 208-217.
  9. Christoph Böhringer & Thomas Rutherford, 2002. "Carbon Abatement and International Spillovers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 391-417, July.
  10. Hoel, M., 1989. "Global Environmental Problems: The Effects Of Unilateral Actions Taken By One Country," Memorandum 11/1989, Oslo University, Department of Economics.
  11. Bednar-Friedl, Birgit & Schinko, Thomas & Steininger, Karl W., 2012. "The relevance of process emissions for carbon leakage: A comparison of unilateral climate policy options with and without border carbon adjustment," Energy Economics, Elsevier, vol. 34(S2), pages 168-180.
  12. Ghosh, Madanmohan & Luo, Deming & Siddiqui, Muhammad Shahid & Zhu, Yunfa, 2012. "Border tax adjustments in the climate policy context: CO2 versus broad-based GHG emission targeting," Energy Economics, Elsevier, vol. 34(S2), pages 154-167.
  13. Fischer, Carolyn & Fox, Alan K., 2012. "Climate policy and fiscal constraints: Do tax interactions outweigh carbon leakage?," Energy Economics, Elsevier, vol. 34(S2), pages 218-227.
  14. Boeters, Stefan & Bollen, Johannes, 2012. "Fossil fuel supply, leakage and the effectiveness of border measures in climate policy," Energy Economics, Elsevier, vol. 34(S2), pages 181-189.
  15. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
  16. Christoph Böhringer & Brita Bye & Taran Fæhn & Knut Einar Rosendahl, 2012. "Alternative Designs for Tariffs on Embodied Carbon: A Global Cost-Effectiveness Analysis," Working Papers V-345-12, University of Oldenburg, Department of Economics, revised Jun 2012.
  17. repec:zbw:hohpro:340 is not listed on IDEAS
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