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Frameworks for Evaluating Policy Approaches to Address the Competitiveness Concerns of Mitigating Greenhouse Gas Emissions

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  • Joseph E. Aldy

Abstract

Domestic carbon pricing policies may impose adverse competitiveness risks on energy-intensive firms competing with foreign firms that may bear a lower carbon price. The risks of competitiveness effects include adverse economic and environmental outcomes, which can undermine political support for carbon pricing. Competitiveness policies, such as border tax adjustments, output-based tax credits, and related policies, also carry potential risks: unfavorable distributional outcomes, less cost-effective, and harming international trade and climate negotiations. This paper reviews the theoretical and empirical research on competitiveness risks and the risks posed by competitiveness policies, and presents two alternative frameworks for evaluating competitiveness policy options.

Suggested Citation

  • Joseph E. Aldy, 2017. "Frameworks for Evaluating Policy Approaches to Address the Competitiveness Concerns of Mitigating Greenhouse Gas Emissions," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(2), pages 395-420, June.
    • Handle: RePEc:ntj:journl:v:70:y:2017:i:2:p:395-420
    DOI: 10.17310/ntj.2017.2.06
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    Cited by:

    1. Landry, Joel R., 2021. "The political allocation of green pork and its implications for federal climate policy," Journal of Public Economics, Elsevier, vol. 201(C).
    2. Michael Keen & Ian Parry & James Roaf, 2022. "Border carbon adjustments: rationale, design and impact," Fiscal Studies, John Wiley & Sons, vol. 43(3), pages 209-234, September.
    3. George David Banks & Timothy Fitzgerald, 2020. "A sectoral approach allows an artful merger of climate and trade policy," Climatic Change, Springer, vol. 162(2), pages 165-173, September.
    4. Jean-Thomas Bernard & Md. Jakir Hussain & Mishaal Masud Sinha, 2016. "Survival of the Cleanest? Evidence from a Plant Level Analysis of Pollutant Emissions in Canadian Pulp and Paper Industry, 2005-2013," Working Papers 1604E, University of Ottawa, Department of Economics.
    5. Miria A. Pigato, 2019. "Fiscal Policies for Development and Climate Action," World Bank Publications - Books, The World Bank Group, number 31051.
    6. Jean-Thomas Bernard & Jakir Hussain & Mishaal Masud Sinha, 2020. "Survival of the cleanest? Evidence from a plant-level analysis of pollutant emissions in Canadian pulp and paper industry, 2005–2013," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(2), pages 109-126, April.
    7. Hafele, Jakob & Kuhls, Sonia, 2022. "Trade-off or tension: Can carbon be priced without risking economic competitiveness?," ZOE Discussion Papers 9, ZOE. institute for future-fit economies, Bonn.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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