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Border tax adjustments and the EU-ETS - A quantitative assessment

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  • Manders, Ton
  • Veenendaal, Paul

Abstract

If the EU stands alone in adopting climate policy and imposes a strict emissions ceiling, competitiveness of EU energy-intensive sectors will be affected negatively. Relocation of EU energy-intensive firms to countries with a lax regime also leads to carbon leakage. However, when use is made of the opportunities of the Clean Development Mechanism these impacts are very modest. Border tax adjustments (BTAs) to ‘level the playing field’ between domestic and foreign producers may be considered to address the concerns about both competitiveness and carbon leakage. It is far from clear whether these measures are WTO-proof. Simulations show that both an import levy and an export refund restore competitiveness to a certain extent. BTAs may lower the costs for energy-intensive sectors, but induce higher costs for other sectors. This paper uses a general equilibrium model to quantify and assess the implications of a number of policy scenarios.

Suggested Citation

  • Manders, Ton & Veenendaal, Paul, 2008. "Border tax adjustments and the EU-ETS - A quantitative assessment," Conference papers 331812, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331812
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    File URL: https://ageconsearch.umn.edu/record/331812/files/3702.pdf
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    References listed on IDEAS

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    Cited by:

    1. Rojas-Romagosa, Hugo, 2010. "Wage inequality in trade-in-tasks models," Conference papers 331923, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Bellora, Cecilia, 2020. "Carbon Border Adjustment and Alternatives," Conference papers 333210, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Bellora, Cecilia & Fontagné, Lionel, 2023. "EU in search of a Carbon Border Adjustment Mechanism," Energy Economics, Elsevier, vol. 123(C).

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