Taxing Carbon along the Value Chain. A WIOD CGE Application

Oliver Schenker, Simon Koesler and Andreas Löschel

No 332248, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: In this paper we examine global carbon supply chains and assess the effects of tariffs on embodied carbon in a computable general equilibrium framework. Thereby, we take advantage of the comprehensive representation of international trade flows in the new World Input-Output (WIOD) dataset and specifically adjust the value of due embodied carbon tariffs accordingly. Hence we account for a potential overlap in regulation, if intermediate inputs are taxed multiple times along the supply chain of a product due to environmentally motivated trade policy. Carbon is added at numerous stages during the production of a good and even though domestic inputs dominate, especially in energy and trade intensive non-domestic carbon input is significant. Building on this insight, we show that compared to a simplistic Border Tax Adjustment (BTA) approach, taxing all embodied carbon in imports, accounting for the origin of carbon in the production process reduces economic distortions and decreases the social cost of a BTA regime accompanying unilateral climate policy.

Keywords: Public Economics; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 24
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332248

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