The Impact of Border Carbon Adjustments under Alternative Producer Responses

Niven Winchester

No 332159, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Border carbon adjustments (BCAs) have been proposed to address leakage and competitiveness concerns. In traditional assessments, firms regard BCAs as output taxes rather than implicit emissions taxes. Using a stylized energy-economic model, we analyze the impact of BCAs for alternative producer responses. When firms view BCAs as an implicit emissions tax, the outcome depends on whether or not firms can differentiate production across destination markets. If firms are able to produce a lowemissions variety for regions imposing BCAs, results are similar to when firms regard BCAs as an output tax. If firms produce a single variety for all markets, BCAs result in larger leakage reductions than in standard approaches. We also find that BCAs are less effective at addressing competitive concerns in scenarios that result in larger leakage reductions.

Keywords: Environmental Economics and Policy; Public Economics (search for similar items in EconPapers)
Pages: 20
Date: 2011
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Citations: View citations in EconPapers (1)

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Journal Article: The Impact of Border Carbon Adjustments Under Alternative Producer Responses (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332159

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