IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Competitiveness and Leakage Concerns and Border Carbon Adjustments

  • Zhang, Zhong Xiang

This paper provides a review of the literature on competitiveness and leakage concerns associated with differentiated climate abatement commitments among countries. The literature reviewed is not exhausted, but it is sufficient to provide a balanced view of both academics and policy circles. Section 2 discusses how to identify the sectors at a risk of carbon leakage. Section 3 examines ex ante estimates of potential carbon leakage rates, and explains why they differ from ex post results of environmental tax reforms and greenhouse gas emissions trading schemes that have been implemented in the European Union. Section 4 discusses broad policy options to address competitiveness and leakage concerns, and compares which anti-leakage policy, border adjustments or output-based allocation, is more effective to limiting carbon leakages or mitigating production loss in the sectors affected. Given that border carbon adjustment measures are incorporated in the U.S. proposed congressional climate bills to level the carbon playing field and could have potential conflicts with World Trade Organization (WTO) provisions and practical difficulties associated with their implementation, Section 5 discuses in great detail the WTO consistency, the effectiveness and methodological challenges of border carbon adjustment measures. The paper ends with some concluding remarks.

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.

File URL: http://dx.doi.org/10.1561/101.00000052
Download Restriction: no

Article provided by now publishers in its journal International Review of Environmental and Resource Economics.

Volume (Year): 6 (2012)
Issue (Month): 3 (December)
Pages: 225-287

as
in new window

Handle: RePEc:now:jirere:101.00000052
Contact details of provider: Web page: http://www.nowpublishers.com/

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.:

as in new window
  1. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Söderholm, Patrik & Sundqvist, Thomas, 2007. "Empirical challenges in the use of learning curves for assessing the economic prospects of renewable energy technologies," Renewable Energy, Elsevier, vol. 32(15), pages 2559-2578.
  3. Corrado Di Maria & Barry Anderson & Frank Convery, 2009. "Abatement and Allocation in the Pilot Phase of the EU ETS," Working Papers 2009.110, Fondazione Eni Enrico Mattei.
  4. Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner & Laure B. de Preux, 2012. "Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," CEP Discussion Papers dp1150, Centre for Economic Performance, LSE.
  5. Yan Dong & John Walley, 2012. "How Large Are The Impacts Of Carbon Motivated Border Tax Adjustments?," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1250001-1-1.
  6. Adam Rose & Zhong Zhang, 2004. "Interregional burden-sharing of greenhouse gas mitigation in the United States," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 9(4), pages 477-500, October.
  7. A. Ellerman & Barbara Buchner, 2008. "Over-Allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005–06 Emissions Data," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 267-287, October.
  8. William A. Pizer & David Popp, 2007. "Endogenizing Technological Change: Matching Empirical Evidence to Modeling Needs," NBER Working Papers 13053, National Bureau of Economic Research, Inc.
  9. Rivers, Nic, 2010. "Impacts of climate policy on the competitiveness of Canadian industry: How big and how to mitigate?," Energy Economics, Elsevier, vol. 32(5), pages 1092-1104, September.
  10. 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.
  11. Zhang, ZhongXiang, 1998. "Greenhouse gas emissions trading and the world trading system," MPRA Paper 12971, University Library of Munich, Germany.
  12. Damien Demailly & Philippe Quirion, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: Grandfathering vs. output-based allocation," Post-Print halshs-00639327, HAL.
  13. Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
  14. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Tavoni, Massimo, 2008. "International energy R&D spillovers and the economics of greenhouse gas atmospheric stabilization," Energy Economics, Elsevier, vol. 30(6), pages 2912-2929, November.
  15. Lawrence H. Goulder & Robert N. Stavins, 2010. "Interactions between State and Federal Climate Change Policies," NBER Working Papers 16123, National Bureau of Economic Research, Inc.
  16. Carbone, Jared C. & Helm, Carsten & Rutherford, Thomas F., 2008. "The Case for International Emission Trade in the Absence of Cooperative Climate Policy," Darmstadt Discussion Papers in Economics 35491, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  17. ZhongXiang Zhang, 2009. "Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO?," Working Papers 2009.81, Fondazione Eni Enrico Mattei.
  18. Philippe Quirion, 2009. "Historic versus output-based allocation of GHG tradable allowances: a comparison," Climate Policy, Taylor & Francis Journals, vol. 9(6), pages 575-592, November.
  19. Mika Saito, 2004. "Armington Elasticities in Intermediate Inputs Trade; A Problem in Using Multilateral Trade Data," IMF Working Papers 04/22, International Monetary Fund.
  20. Gielen, Dolf & Moriguchi, Yuichi, 2002. "CO2 in the iron and steel industry: an analysis of Japanese emission reduction potentials," Energy Policy, Elsevier, vol. 30(10), pages 849-863, August.
  21. Oikonomou, Vlasis & Patel, Martin & Worrell, Ernst, 2006. "Climate policy: Bucket or drainer?," Energy Policy, Elsevier, vol. 34(18), pages 3656-3668, December.
  22. Monjon, Stéphanie & Quirion, Philippe, 2011. "Addressing leakage in the EU ETS : Border adjustment or output-based allocation ?," Economics Papers from University Paris Dauphine 123456789/7346, Paris Dauphine University.
  23. repec:hal:wpaper:hal-00866444 is not listed on IDEAS
  24. Babiker, Mustafa H., 2005. "Climate change policy, market structure, and carbon leakage," Journal of International Economics, Elsevier, vol. 65(2), pages 421-445, March.
  25. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  26. Philippe Quirion & Damien Demailly, 2006. "Leakage from climate policies and border tax adjustment:lessons from a geographic model of the cement industry," CIRED Working Papers halshs-00009337, HAL.
  27. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
  28. Brian R. Copeland & M. Scott Taylor, 2000. "Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol," NBER Working Papers 7657, National Bureau of Economic Research, Inc.
  29. Bruvoll, Annegrete & Faehn, Taran, 2006. "Transboundary effects of environmental policy: Markets and emission leakages," Ecological Economics, Elsevier, vol. 59(4), pages 499-510, October.
  30. Johannes Bollen & Arjen Gielen & Hans Timmer, 1999. "Clubs, Ceilings and CDM: Macroeconomics of Compliance with the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 177-206.
  31. 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.
  32. Sijm, J. & Neuhoff, K. & Chen, Y., 2006. "CO2 cost pass through and windfall profits in the power sector," Cambridge Working Papers in Economics 0639, Faculty of Economics, University of Cambridge.
  33. Ian W. H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," NBER Working Papers 5967, National Bureau of Economic Research, Inc.
  34. ZhongXiang Zhang, 2012. "Who should bear the cost of China’s carbon emissions embodied in goods for exports?," Mineral Economics, Springer, vol. 24(2), pages 103-117, June.
  35. Golombek Rolf & Hoel Michael, 2004. "Unilateral Emission Reductions and Cross-Country Technology Spillovers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-27, September.
  36. Zhang, ZhongXiang & Assunção, Lucas, 2002. "Domestic climate policies and the WTO," MPRA Paper 13223, University Library of Munich, Germany.
  37. Hufbauer, Gary Clyde & Kim, Jisun, 2009. "Climate policy options and the World Trade Organization," Economics Discussion Papers 2009-20, Kiel Institute for the World Economy.
  38. Reyer Gerlagh & Onno Kuik, 2007. "Carbon Leakage with International Technology Spillovers," Working Papers 2007.33, Fondazione Eni Enrico Mattei.
  39. Dissou, Yazid & Eyland, Terry, 2011. "Carbon control policies, competitiveness, and border tax adjustments," Energy Economics, Elsevier, vol. 33(3), pages 556-564, May.
  40. Frank Convery & Christian De Perthuis & Denny Ellerman, 2008. "The European Carbon Market In Action: Lessons From The First Trading Period. Interim Report," Working Papers 0802, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  41. Agnolucci, Paolo, 2009. "The effect of the German and British environmental taxation reforms: A simple assessment," Energy Policy, Elsevier, vol. 37(8), pages 3043-3051, August.
  42. Bruvoll, Annegrete & Larsen, Bodil Merethe, 2004. "Greenhouse gas emissions in Norway: do carbon taxes work?," Energy Policy, Elsevier, vol. 32(4), pages 493-505, March.
  43. ZhongXiang Zhang, 2003. "Open Trade with the U.S. without Compromising Canada’s Ability to Comply with its Kyoto Target," Working Papers 2003.68, Fondazione Eni Enrico Mattei.
  44. Gillingham, Kenneth T. & Newell, Richard G. & Pizer, William A., 2007. "Modeling Endogenous Technological Change for Climate Policy Analysis," Discussion Papers dp-07-14, Resources For the Future.
  45. Patrik Söderholm & Ger Klaassen, 2007. "Wind Power in Europe: A Simultaneous Innovation–Diffusion Model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(2), pages 163-190, February.
  46. 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.
  47. Lars Mathiesen and Ottar Maestad, 2004. "Climate Policy and the Steel Industry: Achieving Global Emission Reductions by an Incomplete Climate Agreement," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 91-114.
  48. Paul Ekins, 2012. "Sustainable growth revisited: technology, economics and policy," Mineral Economics, Springer, vol. 24(2), pages 59-77, June.
  49. Grossman, Gene M., 1980. "Border tax adjustments: Do they distort trade?," Journal of International Economics, Elsevier, vol. 10(1), pages 117-128, February.
  50. Jean-Marc Burniaux & Jean Château & Romain Duval & Stéphanie Jamet, 2008. "The Economics of Climate Change Mitigation: Policies and Options for the Future," OECD Economics Department Working Papers 658, OECD Publishing.
  51. De Perthuis, Christian & Convery, Frank J. & Ellerman, Denny, 2010. "Pricing carbon : the European Union Emissions Trading Scheme," Economics Papers from University Paris Dauphine 123456789/10174, Paris Dauphine University.
  52. Claudia Kettner & Daniela Kletzan-Slamanig & Angela Köppl, 2011. "The EU Emission Trading Scheme. Allocation Patterns and Trading Flows," WIFO Working Papers 402, WIFO.
  53. Clò, Stefano, 2010. "Grandfathering, auctioning and Carbon Leakage: Assessing the inconsistencies of the new ETS Directive," Energy Policy, Elsevier, vol. 38(5), pages 2420-2430, May.
  54. Zhang, ZhongXiang, 2003. "Why Has China not Embraced a Global Cap-and-Trade Regime?," MPRA Paper 12783, University Library of Munich, Germany, revised Jul 2007.
  55. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
  56. Yan Dong & John Whalley, 2009. "Carbon Motivated Regional Trade Arrangements: Analytics and Simulations," NBER Working Papers 14880, National Bureau of Economic Research, Inc.
  57. Enevoldsen, Martin K. & Ryelund, Anders V. & Andersen, Mikael Skou, 2007. "Decoupling of industrial energy consumption and CO2-emissions in energy-intensive industries in Scandinavia," Energy Economics, Elsevier, vol. 29(4), pages 665-692, July.
  58. Zhang, Zhong Xiang, 1999. "Should the rules of allocating emissions permits be harmonised?," Ecological Economics, Elsevier, vol. 31(1), pages 11-18, October.
  59. Zhang, ZhongXiang & Baranzini, Andrea, 2004. "What do we know about carbon taxes? An inquiry into their impacts on competitiveness and distribution of income," Energy Policy, Elsevier, vol. 32(4), pages 507-518, March.
  60. Rose, Adam & Peterson, Thomas D. & Zhang, ZhongXiang, 2006. "Regional carbon dioxide permit trading in the United States: coalition choices for Pennsylvania," MPRA Paper 13547, University Library of Munich, Germany.
  61. Zhang, ZhongXiang, 2000. "Can China afford to commit itself an emissions cap? An economic and political analysis," Energy Economics, Elsevier, vol. 22(6), pages 587-614, December.
  62. Alexeeva-Talebi, Victoria, 2011. "Cost pass-through of the EU emissions allowances: Examining the European petroleum markets," Energy Economics, Elsevier, vol. 33(S1), pages S75-S83.
  63. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
  64. Jean-Marc Burniaux & Jean Château & Rob Dellink & Romain Duval & Stéphanie Jamet, 2009. "The Economics of Climate Change Mitigation: How to Build the Necessary Global Action in a Cost-Effective Manner," OECD Economics Department Working Papers 701, OECD Publishing.
  65. World Bank, 2007. "International trade and Climate Change : Economic, Legal, and Institutional Perspectives," World Bank Publications, The World Bank, number 6831, September.
  66. Lessmann, Kai & Marschinski, Robert & Edenhofer, Ottmar, 2009. "The effects of tariffs on coalition formation in a dynamic global warming game," Economic Modelling, Elsevier, vol. 26(3), pages 641-649, May.
  67. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
  68. repec:cup:cbooks:9780521196475 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:now:jirere:101.00000052. 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: (Alet Heezemans)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.