TY - JOUR
T1 - Comparing policies to combat emissions leakage
T2 - Border carbon adjustments versus rebates
AU - Fischer, Carolyn
AU - Fox, Alan K.
PY - 2012/9
Y1 - 2012/9
N2 - We explore conditions determining which anti-leakage policies might be more effective complements to domestic greenhouse gas emissions regulation. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border charge on imports, a border rebate for exports, full border adjustment, and domestic output-based rebating. Each option faces different potential legal hurdles in international trade law; each also has different economic impacts. While all can support competitiveness, none is necessarily effective at reducing global emissions. Nor is it possible to rank order the options; effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes. We illustrate these results with simulations for the energy-intensive sectors of three different economies, the United States, Canada and Europe. Although most controversial, full border adjustment is usually most effective, but output-based rebating for key manufacturing sectors can achieve many of the gains.
AB - We explore conditions determining which anti-leakage policies might be more effective complements to domestic greenhouse gas emissions regulation. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border charge on imports, a border rebate for exports, full border adjustment, and domestic output-based rebating. Each option faces different potential legal hurdles in international trade law; each also has different economic impacts. While all can support competitiveness, none is necessarily effective at reducing global emissions. Nor is it possible to rank order the options; effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes. We illustrate these results with simulations for the energy-intensive sectors of three different economies, the United States, Canada and Europe. Although most controversial, full border adjustment is usually most effective, but output-based rebating for key manufacturing sectors can achieve many of the gains.
KW - Border adjustment
KW - Climate
KW - Emissions leakage
KW - Environmental tax
KW - Rebate
UR - http://www.scopus.com/inward/record.url?scp=84865158635&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84865158635&partnerID=8YFLogxK
U2 - 10.1016/j.jeem.2012.01.005
DO - 10.1016/j.jeem.2012.01.005
M3 - Article
AN - SCOPUS:84865158635
SN - 0095-0696
VL - 64
SP - 199
EP - 216
JO - Journal of Environmental Economics and Management
JF - Journal of Environmental Economics and Management
IS - 2
ER -