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Climate Policy, Carbon Leakage and Competitiveness: How Might Border Tax Adjustments Help?

Ian Sheldon and Steve McCorriston

No 103207, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: In this paper, analysis is presented relating to the impact of border tax adjustments for climate policy on the international competitiveness of energy-intensive industries, and the related problem of carbon leakage. While many of the economic and legal issues are not particularly new, climate policy does present some possible twists to the analysis of border tax adjustments when vertically-related markets can be characterized as a successive oligopoly. Specifically, an appropriate border tax adjustment will depend on the incidence of a domestic carbon tax, the nature of competition in upstream and downstream sectors, as well as the basis for assessing the trade neutrality of any border tax adjustment. If trade neutrality is defined in terms of market volume, even though carbon leakage is reduced, domestic firm competitiveness cannot be maintained. This compares to defining trade neutrality in terms of market share, which results in domestic competitiveness being maintained and global carbon emissions being reduced.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 32
Date: 2011
New Economics Papers: this item is included in nep-acc, nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103207

DOI: 10.22004/ag.econ.103207

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