Targeted carbon tariffs: Export response, leakage and welfare

Christoph Böhringer, Brita Bye, Taran Fæhn and Knut Einar Rosendahl

Resource and Energy Economics, 2017, vol. 50, issue C, 51-73

Abstract: Climate benefits of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a stylized model analysis on the economic incentives for emissions abatement of producers subjected to carbon tariffs. The impacts of different carbon tariff designs are, then, quantified by an empirically based multi-sector, multi-region computable general equilibrium model of the global economy. We find that firm-targeted tariffs can deliver considerably stronger leakage reduction and higher gains in global cost-effectiveness than tariff designs operated at the industry level. Moreover, because the exporters are able to reduce their carbon tariffs by adjusting emissions, their competitiveness and the overall welfare of their economies will be less adversely affected than in the case of industry-level carbon tariff regimes.

Keywords: Carbon leakage; Border carbon adjustment; Carbon tariffs; Computable general equilibrium (CGE) (search for similar items in EconPapers)
JEL-codes: D61 H2 Q43 Q54 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:50:y:2017:i:c:p:51-73

DOI: 10.1016/j.reseneeco.2017.06.003

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