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http://hdl.handle.net/10419/24757
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| Title: | | Climate Policy and the Problem of Competitiveness: Border Tax Adjustments or Integrated Emission Trading?  |
| Authors: | | Löschel, Andreas Alexeeva-Talebi, Victoria Mennel, Tim |
| Issue Date: | | 2008 |
| Series/Report no.: | | ZEW Discussion Papers 08-061 |
| Abstract: | | In the absence of an international agreement on climate policy, unilateral carbon abatement creates two problems: It tends to have a detrimental effect on domestic competitiveness, and it leads to an increase in carbon emissions abroad (leakage). This paper analyses two policies that have recently been proposed to mitigate these problems: Border tax adjustments (BTA) and integrated emission trading (IET). The former policy levies a quantity-based, the latter an emission based duty on imports from non-abating countries. In a stylised two-country model we demonstrate that the policies address both problems. However, BTA protects domestic competitiveness more effectively, while IET achieves a greater reduction in foreign emissions. A computational general equilibrium analysis of the unilateral abatement policy adopted by the European Union confirms our theoretical insights for the sectors covered by the offsetting measures. However, the implications for the competitiveness of noncovered sectors are negative. These two effects constitute the central trade-off in the implementation of both policies. |
| Subjects: | | Border Tax Adjustments Climate Policy Competitiveness Emission Trading |
| JEL: | | F18 Q48 D58 H23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des ZEW ZEW Discussion Papers
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