IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Pollution Control, Competitiveness, and Border Tax Adjustment

Listed author(s):
  • Yazid Dissou


    (Department of Economics, University of Ottawa, Ottawa, ON)

This paper explores in a general equilibrium framework the welfare and sectoral implications of an optimally designed system of border tax adjustments (BTA) on the imports of energy-intensive industries. Recently, several propositions have been made by policy makers and researchers to use BTA as a restrictive trade policy instrument to address the loss of competitiveness induced by unilateral stringent domestic pollution control policies. In this paper, we define the loss of competitiveness not as a loss of output by domestic energy-intensive producers, but instead as a loss of their market shares. We argue and we show using the Canadian economy as illustration that the most often proposed BTA, which is based on the carbon embodiment of the import good, may under- or over-achieve the objective of addressing the competitive disadvantage of domestic energy-intensive industries. In some cases, the proposed BTA may over protect the domestic energy-intensive industries by providing implicit subsidies as they might even increase their production in the presence of carbon taxes. Similarly, the proposed BTA may fail to fully restore the competitiveness of domestic producers, vis-à-vis their foreign peers. We determine the optimal BTAs on imports that fully restore the competitiveness of domestic firms following unilateral stringent pollution control policies. The ‘optimal’ BTAs take into consideration the general equilibrium effects of the carbon tax and of the import charges on the prices of domestic goods. In most cases, the impact their impact on import prices is higher than in the previous case. As a consequence, they entail higher distortions on resource allocation in the economy and hence higher welfare cost to households.

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:
Download Restriction: no

Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0911E.

in new window

Length: 24 pages
Date of creation: 2009
Handle: RePEc:ott:wpaper:0911e
Contact details of provider: Postal:
PO Box 450, Station A, Ottawa, Ontario, K1N 6N5

Phone: (613) 562-5753
Fax: (613) 562-5999
Web page:

More information through EDIRC

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.:

in new window

  1. 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.
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:ott:wpaper:0911e. 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: (Diane Ritchot)

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.