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DESIGNING A GLOBALLY ACCEPTABLE CARBON TAX SCHEME TO ADDRESS COMPETITIVENESS AND LEAKAGE CONCERNS

Lei Zhu (), Lianbiao Cui () and Joachim Schleich
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Lianbiao Cui: #x2020;School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu 233030, P. R. China

Climate Change Economics (CCE), 2020, vol. 11, issue 02, 1-21

Abstract: To address competitiveness and leakage concerns in international climate policy, this paper proposes a differentiated carbon tax scheme (DCT), which largely preserves the relative competitive positions of developed and developing countries. The paper first presents a theoretical model from which to derive the DCT. Then, employing a global trade analysis model, competitiveness and leakage effects under a DCT are simulated and contrasted to those of a unilateral carbon tax, a carbon tariff, and a uniform carbon tax. The results of our analysis suggest that: (1) under the proposed DCT, emission reductions in developed and developing countries are higher and leakage is lower than under a carbon tariff; (2) the DCT has weaker competitiveness effects than a carbon tariff; and (3) the DCT is more favorable to developing countries’ output and welfare than a carbon tariff or a uniform global carbon tax. Developing countries may therefore embrace a DCT as an intermediate step towards the implementation of a global carbon tax.

Keywords: Differentiated carbon tax scheme; carbon tariffs; cost fairness principle; competitive advantage; global trade analysis model (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S2010007820500086

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