Framework Proposal for a US Upstream GHG Tax with WTO-Compliant Border Adjustments: 2020 Update

Brian Flannery, Jennifer A. Hillman, Jan Mares and Matthew C. Porterfield
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Brian Flannery: Resources for the Future
Jan Mares: Resources for the Future

No 20-14, RFF Reports from Resources for the Future

Abstract: The original Framework (2018) described how to design BTAs in the context of a US upstream GHG tax. Rules of the World Trade Organization (WTO) allow nations to rebate value-added taxes (VATs) on exported products and impose them on imports. For that reason the Framework explicitly defined the GHG-index (GGI) in close analogy with VATs as its basis for BTAs. GGI tracks taxed sources of GHG emissions along supply and manufacturing chains to produce GHG-intensive products. BTAs for products are determined by their GGI multiplied by the US GHG tax. Justification for WTO-compatibility relies on Articles II and III of the General Agreement on Tariffs and Trade (GATT) for import charges, and on the Agreement on Subsidies and Countervailing Measures (ASCM) for export rebates.

Date: 2020-10-23
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