Cost-effective unilateral climate policy design: Size matters

Christoph Böhringer, Carolyn Fischer and Knut Einar Rosendahl

Journal of Environmental Economics and Management, 2014, vol. 67, issue 3, 318-339

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.

Keywords: Emissions leakage; Border carbon adjustments; Output-based rebates (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (60)

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Working Paper: Cost-Effective Unilateral Climate Policy Design: Size Matters (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:67:y:2014:i:3:p:318-339

DOI: 10.1016/j.jeem.2013.12.008

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