IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v40y2015icp127-142.html
   My bibliography  Save this article

Unilateral consumption-based carbon taxes and negative leakage

Author

Listed:
  • Eichner, Thomas
  • Pethig, Rüdiger

Abstract

We investigate the performance of a consumption-based carbon tax – implemented by full border carbon adjustment – as an instrument of unilateral climate damage mitigation in a two-period two-country general equilibrium model with a finite stock of fossil fuel. The implementation of that tax in the first period reduces the first-period emissions in the taxing and non-taxing country (negative within period leakage) if income effects are sufficiently weak. Otherwise, it increases the first-period emissions in both countries (green paradox). That result contrasts with the case of a unilateral production-based carbon tax, in which the leakage rate is always positive and possibly exceeds 100%.

Suggested Citation

  • Eichner, Thomas & Pethig, Rüdiger, 2015. "Unilateral consumption-based carbon taxes and negative leakage," Resource and Energy Economics, Elsevier, vol. 40(C), pages 127-142.
    • Handle: RePEc:eee:resene:v:40:y:2015:i:c:p:127-142
    DOI: 10.1016/j.reseneeco.2015.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765515000172
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.reseneeco.2015.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kathy Baylis & Don Fullerton & Daniel H. Karney, 2014. "Negative Leakage," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 51-73.
    2. Zhang, Zhong Xiang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," International Review of Environmental and Resource Economics, now publishers, vol. 6(3), pages 225-287, December.
    3. Sinclair, Peter J N, 1992. "High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(1), pages 41-52, March.
    4. Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Global COE Hi-Stat Discussion Paper Series gd08-013, Institute of Economic Research, Hitotsubashi University.
    5. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2016. "Carbon Leakages: A General Equilibrium View," Studies in Economic Theory, in: Graciela Chichilnisky & Armon Rezai (ed.), The Economics of the Global Environment, pages 341-363, Springer.
    6. Michael Jakob & Robert Marschinski & Michael Hübler, 2013. "Between a Rock and a Hard Place: A Trade-Theory Analysis of Leakage Under Production- and Consumption-Based Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 47-72, September.
    7. ZhongXiang Zhang, 2012. "Climate Change Meets Trade in Promoting Green Growth: Potential Conflicts and Synergies," Chapters, in: Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), Responding to Climate Change, chapter 6, Edward Elgar Publishing.
    8. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, August.
    9. Eichner, Thomas & Pethig, Ru¨diger, 2013. "Flattening the carbon extraction path in unilateral cost-effective action," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 185-201.
    10. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo Group, vol. 57(1), pages 79-102, March.
    11. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
    12. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    13. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    14. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    15. Sinclair, Peter J N, 1994. "On the Optimum Trend of Fossil Fuel Taxation," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 869-877, Supplemen.
    16. repec:dau:papers:123456789/7970 is not listed on IDEAS
    17. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    18. Babiker, Mustafa H., 2005. "Climate change policy, market structure, and carbon leakage," Journal of International Economics, Elsevier, vol. 65(2), pages 421-445, March.
    19. André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 439-463, December.
    20. 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.
    21. 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.
    22. Jota Ishikawa & Kazuharu Kiyono, 2006. "Greenhouse-Gas Emission Controls In An Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 431-450, May.
    23. Wiedmann, Thomas, 2009. "A review of recent multi-region input-output models used for consumption-based emission and resource accounting," Ecological Economics, Elsevier, vol. 69(2), pages 211-222, December.
    24. Sinclair, P.J.N., 1994. "On the Optimum Trend of Fossil Fuel Taxation," Discussion Papers 94-16, Department of Economics, University of Birmingham.
    25. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January.
    26. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-868, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christoph Böhringer & Knut Einar Rosendahl & Halvor Storrøsten, 2021. "Smart hedging against carbon leakage [An overview of the GTAP 9 data base]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 36(107), pages 439-484.
    2. Böhringer, Christoph & Rosendahl, Knut Einar & Storrøsten, Halvor Briseid, 2017. "Robust policies to mitigate carbon leakage," Journal of Public Economics, Elsevier, vol. 149(C), pages 35-46.
    3. Francesca Sanna-Randaccio & Roberta Sestini & Ornella Tarola, 2017. "Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(2), pages 379-401, June.
    4. HIGASHIDA Keisaku & ISHIKAWA Jota & TARUI Nori, 2021. "Carrying Carbon? Negative and Positive Carbon Leakage with International Transport," Discussion papers 21102, Research Institute of Economy, Trade and Industry (RIETI).
    5. Zhang, Zengkai & Zhang, Zhongxiang, 2017. "Intermediate input linkage and carbon leakage," Environment and Development Economics, Cambridge University Press, vol. 22(6), pages 725-746, December.
    6. Christoph Böhringer & Knut Einar Rosendahl & Halvor Briseid Storrøsten, 2015. "Mitigating carbon leakage: Combining output-based rebating with a consumption tax," ZenTra Working Papers in Transnational Studies 54 / 2015, ZenTra - Center for Transnational Studies.
    7. Noha Elboghdadly & Michael Finus, 2020. "Non-Cooperative Climate Policies among Asymmetric Countries: Production- versus Consumption-based Carbon Taxes," Graz Economics Papers 2020-16, University of Graz, Department of Economics.
    8. Cheng, Haitao, 2021. "Border carbon adjustments with endogenous assembly locations," Economic Modelling, Elsevier, vol. 105(C).
    9. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    10. John E. T. Bistline & James Merrick & Victor Niemeyer, 2020. "Estimating Power Sector Leakage Risks and Provincial Impacts of Canadian Carbon Pricing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(1), pages 91-118, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    2. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    3. Thomas Eichner & Rüdiger Pethig, 2015. "Unilateral Climate Policy with Production-Based and Consumption-Based Carbon Emission Taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 141-163, June.
    4. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo.
    5. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    6. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, August.
    7. Eichner, Thomas & Pethig, Ru¨diger, 2013. "Flattening the carbon extraction path in unilateral cost-effective action," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 185-201.
    8. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    9. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    10. Ritter, Hendrik & Runkel, Marco & Zimmermann, Karl, 2019. "Environmental Effects of Capital Income Taxation - A New Double Dividend?," EconStor Preprints 195172, ZBW - Leibniz Information Centre for Economics.
    11. Cathrine Hagem & Halvor Briseid Storrøsten, 2019. "Supply‐ versus Demand‐Side Policies in the Presence of Carbon Leakage and the Green Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(1), pages 379-406, January.
    12. van der Ploeg, Frederick & Withagen, Cees, 2012. "Too much coal, too little oil," Journal of Public Economics, Elsevier, vol. 96(1), pages 62-77.
    13. Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
    14. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    15. Fischer, Carolyn & Salant, Stephen W., 2017. "Balancing the carbon budget for oil: The distributive effects of alternative policies," European Economic Review, Elsevier, vol. 99(C), pages 191-215.
    16. Luise Röpke, 2015. "Essays on the Integration of New Energy Sources into Existing Energy Systems," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 58.
    17. Jakob, Michael, 2021. "Climate policy and international trade – A critical appraisal of the literature," Energy Policy, Elsevier, vol. 156(C).
    18. Marc Gronwald & Ngo Van Long & Luise Röpke, 2013. "Simultaneous Supplies of Dirty and Green Fuels with Capacity Constraint: Is there a Green Paradox?," CESifo Working Paper Series 4360, CESifo.
    19. Thomas Michielsen, 2013. "Brown Backstops Versus the Green Paradox," OxCarre Working Papers 108, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    20. Gerard Meijden & Frederick Ploeg & Cees Withagen, 2017. "Frontiers of Climate Change Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 1-14, September.

    More about this item

    Keywords

    Consumption-based carbon tax; Production-based carbon tax; Leakage;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:40:y:2015:i:c:p:127-142. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.