Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105034
Authors: 
Böhringer, Christoph
Lange, Andreas
Rutherford, Thomas F.
Year of Publication: 
2012
Series/Report no.: 
Oldenburg Discussion Papers in Economics V-347-12
Abstract: 
Carbon leakage provides an efficiency argument for unilateral climate policy to differentiate emission prices in favor of emission-intensive and trade-exposed sectors. At the same time, differential emission pricing can be (mis-)used as a beggar-thy-neighbor policy to exploit terms of trade. Using an optimal tax framework, we propose a method to decompose the leakage motive and the terms-of-trade motive for emission price differentiation. We employ our method for a quantitative impact assessment of unilateral climate policy based on empirical data. We find that the leakage motive yields only small efficiency gains compared to uniform emission pricing. Likewise, the terms-of-trade motive has rather limited potential for strategic burden shifting. We conclude that the simple first-best rule of uniform emission pricing remains a practical guideline for unilateral climate policy design.
Subjects: 
optimal taxation
emission leakage
terms of trade
JEL: 
H21
Q43
R13
D58
Document Type: 
Working Paper

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