Mitigating carbon leakage: Combining output-based rebating with a consumption tax

Christoph Böhringer, Knut Einar Rosendahl and Halvor Briseid Storrøsten (halvor.storrosten@ssb.no)
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Halvor Briseid Storrøsten: Statistics Norway, Oslo / Norway

No 54 / 2015, ZenTra Working Papers in Transnational Studies from ZenTra - Center for Transnational Studies

Abstract: Unilateral climate policy induces carbon leakage through the relocation of emission-intensive and trade-exposed industries to regions with no or more lenient emission regulation. Both analytical and numerical studies suggest that emission pricing combined with border carbon adjustments may be a second-best instrument, and more cost-effective than output-based rebating, in which case domestic output is indirectly subsidized. No countries have so far imposed border carbon adjustments, while variants of output-based rebating have been implemented. In this paper we demonstrate that it is welfare improving for a region who has already implemented emission pricing along with output-based rebating for emission-intensive and trade-exposed goods to also introduce a consumption tax on these goods. Moreover, we show that combining output-based rebating with a consumption tax can be equivalent with border carbon adjustments.

Keywords: Carbon leakage; output-based rebating; border carbon adjustments; consumption tax (search for similar items in EconPapers)
JEL-codes: D61 H2 Q54 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2015-09
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-reg
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2655564 Current version, 2015 (application/pdf)

Related works:
Working Paper: Mitigating Carbon Leakage: Combining Output-Based Rebating with a Consumption Tax (2015)
Working Paper: Mitigating carbon leakage: Combining output-based rebating with a consumption tax (2015)
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