Coordinating Climate and Trade Policies: Pareto Efficiency and the Role of Border Tax Adjustments

Michael Keen and Christos Kotsogiannis

No 1106, Discussion Papers from University of Exeter, Department of Economics

Abstract: This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distributional concerns that can make non-uniform carbon pricing efficient, and that Pareto-efficiency requires a form of BTA when carbon taxes in some countries are constrained, a special case being identified in which this has the simple structure envisaged in practical policy discussion. It also stresses—a point that has been overlooked in the policy debate—that the case for BTA depends critically on whether climate policies are pursued by carbon taxation or by cap-and-trade.

Keywords: Environmental taxation; cap-and-trade; international trade; Pareto efficiency; border tax adjustments. (search for similar items in EconPapers)
JEL-codes: F18 H20 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Coordinating climate and trade policies: Pareto efficiency and the role of border tax adjustments (2014)
Working Paper: Coordinating Climate and Trade Policies: Pareto Efficiency and the Role of Border Tax Adjustments (2012)
Working Paper: Coordinating Climate and Trade Policies: Pareto Efficiency and the Role of Border Tax Adjustments (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:1106

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