Cost-effective unilateral climate policy design: Size matters

Christoph Böhringer, Carolyn Fischer, Knut Einar Rosendahl

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Given the bleak prospects for a global agreement on mitigating climate change, pressure for unilateral abatement is increasing. A major challenge is emissions leakage. Border carbon adjustments and output-based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own. We assess antileakage measures as a function of abatement coalition size. We first develop a partial equilibrium analytical framework to see how these instruments affect emissions within and outside the coalition. We then employ a computable general equilibrium model of international trade and energy use to assess the strategies as the coalition grows. We find that full border adjustments rank first in global cost-effectiveness, followed by import tariffs and output-based rebates. The differences across measures and their overall appeal decline as the abatement coalition grows. In terms of cost, the coalition countries prefer border carbon adjustments; countries outside the coalition prefer output-based rebates.

Original languageEnglish
Pages (from-to)318-339
Number of pages22
JournalJournal of Environmental Economics and Management
Volume67
Issue number3
DOIs
Publication statusPublished - 2014

Fingerprint

environmental policy
cost
computable general equilibrium analysis
analytical framework
carbon
international trade
energy use
leakage
import
climate change
border
Climate policy
Policy design
Abatement
allocation
allowance
tariff
appeal
Carbon
Rebates

Keywords

  • Border carbon adjustments
  • Emissions leakage
  • Output-based rebates

Cite this

Böhringer, Christoph ; Fischer, Carolyn ; Rosendahl, Knut Einar. / Cost-effective unilateral climate policy design : Size matters. In: Journal of Environmental Economics and Management. 2014 ; Vol. 67, No. 3. pp. 318-339.
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Cost-effective unilateral climate policy design : Size matters. / Böhringer, Christoph; Fischer, Carolyn; Rosendahl, Knut Einar.

In: Journal of Environmental Economics and Management, Vol. 67, No. 3, 2014, p. 318-339.

Research output: Contribution to JournalArticleAcademicpeer-review

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