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Pollution Permit Market and International Trade-exposed Sector: Differentiated Allocations versus Border Adjustment

Author

Listed:
  • Michel Mougeot

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Florence Naegelen

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

Abstract

To limit the loss of competitiveness when domestic firms are subject to stronger regulation than international competitors, a cap-and-trade policy can be associated either with partial grandfathering or with border adjustment. We compare the two policies from a domestic social-welfare point of view when distributional concerns matter. We exhibit the conditions under which these policies have to be implemented, and we show that exportside border adjustment welfare-dominates partial grandfathering. However, the former policy results in a higher profit in the export sector but both a lower consumer surplus and lower profits of domestic-market-oriented firms.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michel Mougeot & Florence Naegelen, 2020. "Pollution Permit Market and International Trade-exposed Sector: Differentiated Allocations versus Border Adjustment," Post-Print hal-02500686, HAL.
    • Handle: RePEc:hal:journl:hal-02500686
    DOI: 10.1628/jite-2020-0031
    as

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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