The role of border carbon adjustment in unilateral climate policy: Overview of an Energy Modeling Forum study (EMF 29)

Christoph Böhringer, Edward Balistreri and Thomas F. Rutherford

Energy Economics, 2012, vol. 34, issue S2, S97-S110

Abstract: Issues of emission leakage and competitiveness are at the fore of the climate policy debate in all the major economies implementing or proposing to implement substantial emission cap-and-trade programs. Unilateral climate policy cannot directly impose emission prices on foreign sources, but it can complement domestic emission pricing with border carbon adjustment to reduce leakage and increase global cost-effectiveness. While border carbon adjustment has a theoretical efficiency rationale, its practical implementation is subject to serious caveats. This article summarizes the results of an Energy Modeling Forum study (EMF 29) on the efficiency and distributional impacts of border carbon adjustment. We find that border carbon adjustment can effectively reduce leakage and ameliorate adverse impacts on energy-intensive and trade-exposed industries of unilaterally abating countries. However, the scope for global cost savings is small. The main effect of border carbon adjustment is to shift the economic burden of emission reduction to non-abating countries through implicit changes in international prices.

Keywords: Unilateral climate policy; Carbon leakage; Border carbon adjustment (search for similar items in EconPapers)
JEL-codes: D58 D61 F18 Q58 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (191)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988312002460
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:s2:p:s97-s110

DOI: 10.1016/j.eneco.2012.10.003

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().