Comparing policies to combat emissions leakage: Border carbon adjustments versus rebates

Closing the emission price gap

“…there could be inter-regional emission reduction effects from first movers) either due to technology spillovers (Bosetti et al, 2009), crowding out of 'dirty' capital stock (Carbone, 2013;Baylis et al, 2013), induced inter-fuel substitution in other countries (Arroyo-Currá s et al, 2013), or technology spill-overs that reduce other countries' abatement costs (Di Maria and van der Werf, 2008). Finally, emission leakage can to a certain extent be alleviated by specific policy instruments, including free allocation of emission permits to energy-intensive, trade-exposed sectors (Fischer and Fox, 2012) and trade measures . For the latter, border tax adjustments and carbon tariffs, both of which impose a price on imports proportional to the amount of emissions generated in their production (Jakob et al, 2013), as well as trade sanctions that pose an incentive to adopt cleaner technologies (Urpelainen, 2013;Lessmann et al, 2009) are the most prominent instances.…”

Strategic Effects of a Border Tax Adjustment

“…Thus, even if the WTO did not like the idea of a BTA, they will surely like the idea that allowing a certain BTA parameter value may simply lead to a full participation outcome without the need of punitive tariffs. This conclusion, has to the best of our knowledge, never been analyzed in CGE type papers such as Fischer and Fox (2009) and Dissou and Eyland (2011). In these studies, they looked at the impact of a full BTA without foreign adhering to any sort of environmental policy, which is different from the strategic interaction modeled here.…”

“…Many recent studies have simulated the sectorial and aggregate impacts of adding BTAs to an economy which had implemented a unilateral environmental policy, see Babiker and Rutherford (2005), Demailly and Quirion (2006), Dissou and Eyland (2011), Fischer and Fox (2009), and Ismer and Neuhoff (2007. A common conclusion is that BTAs can help protect energy-intensive industries that face strong international competition.…”

“…A common conclusion is that BTAs can help protect energy-intensive industries that face strong international competition. Fischer and Fox (2009) consider take an economy that adopted a carbon tax and simulate the difference in carbon leakage and competitiveness in scenarios that either have an import tax (BTA), an export rebate, or both, which is seen as full border adjustment. They conclude that it is possible to rank the options and that effectiveness of each policy is highly dependent on parameters such as elasticities of substitution.…”

Energy Efficiency Governance

“…For the analysis, however, there exists a significant difference between taxes and tradable permits from the legal and economic 75 Other than the quotation by Fischer and Fox (2009), most of the literature agrees in contrasting market-based policy instruments with command-andcontrol instruments, often referred to as 'regulatory instruments' or 'regulation' (e.g. For the analysis, however, there exists a significant difference between taxes and tradable permits from the legal and economic 75 Other than the quotation by Fischer and Fox (2009), most of the literature agrees in contrasting market-based policy instruments with command-andcontrol instruments, often referred to as 'regulatory instruments' or 'regulation' (e.g.…”