Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167517
Authors: 
Böhringer, Christoph
Rutherford, Thomas F.
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6531
Abstract: 
With his announcement to pull the US out of the Paris Agreement US President Donald Trump has snubbed the international climate policy community. Key remaining parties to the Agreement such as Europe and China might call for carbon tariffs on US imports as a sanctioning instrument to coerce US compliance. Our analysis, however, reveals an inconvenient insight for advocates of carbon tariffs: given the possibility of retaliatory tariffs across all imported goods, carbon tariffs do not constitute a credible threat for the US. A tariff war with its main trading partners China and Europe might make the US worse off than compliance with the Paris Agreement but China, in particular, should prefer US defection to a tariff war.
Subjects: 
Paris Agreement
US withdrawal
carbon tariffs
optimal tariffs
tariff war
computable general equilibrium
JEL: 
Q58
D58
Document Type: 
Working Paper

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