Reconciling Climate Change and Trade Policy

Aaditya Mattoo, Arvind Subramanian, Dominique van der Mensbrugghe () and Jianwu He

No WP09-15, Working Paper Series from Peterson Institute for International Economics

Abstract: There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.

Keywords: trade; trade policy; environment; climate change (search for similar items in EconPapers)
JEL-codes: F13 F18 H23 Q56 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
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Citations: View citations in EconPapers (146)

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Related works:
Working Paper: Reconciling Climate Change and Trade Policy (2009)
Working Paper: Reconciling climate change and trade policy (2009)
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