IDEAS home Printed from https://ideas.repec.org/p/rff/dpaper/dp-17-10.html
   My bibliography  Save this paper

Carbon Tax Competitiveness Concerns: Assessing a Best Practices Carbon Credit

Author

Listed:
  • Gray, Wayne

    (Clark University and National Bureau of Economic Research)

  • Metcalf, Gilbert E.

    (Tufts University and National Bureau of Economic Research)

Abstract

This paper considers how industry-focused revenue rebating could be used to address competitiveness and leakage concerns arising from a unilaterally imposed carbon tax. Building on previous work, it investigates how firms in specific energy-intensive, trade-exposed (EITE) sectors would fare under various carbon crediting approaches. Specifically, it focuses on the use of output-based carbon credits tied to best practices in the sector and considers its efficiency and administrative characteristics. It also investigates whether firms have sufficient tax appetite to use such a credit. Our analysis shows that there is considerable variation across sectors in average emissions intensity as well as variation in the shape of sector-specific intensity distributions. Establishments that are older, larger, and less productive tend to have higher emission intensities. A "best practices" carbon credit for firms in EITE sectors could provide compensation for firms and mitigate competitiveness issues to some extent. Some firms, however, would not be able to utilize all of their carbon credits due to insufficient tax appetite. The share of unused credits falls with the stringency of the rebate plan. We also compare crediting with deductibility and find the latter has weaker incentive effects for reducing emissions.

Suggested Citation

  • Gray, Wayne & Metcalf, Gilbert E., 2017. "Carbon Tax Competitiveness Concerns: Assessing a Best Practices Carbon Credit," RFF Working Paper Series dp-17-10, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-17-10
    as

    Download full text from publisher

    File URL: http://www.rff.org/RFF/documents/RFF-DP-17-10.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.
    4. Gorbach, O.G. & Kost, C. & Pickett, C., 2022. "Review of internal carbon pricing and the development of a decision process for the identification of promising Internal Pricing Methods for an Organisation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    5. Rakhmindyarto, Rakhmindyarto & Setyawan, Dhani, 2020. "Understanding the political challenges of introducing a carbon tax in Indonesia," MPRA Paper 111586, University Library of Munich, Germany, revised 02 Aug 2020.
    6. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-17-10. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Resources for the Future (email available below). General contact details of provider: https://edirc.repec.org/data/rffffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.