Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171678
Authors: 
Balistreri, Edward
Kaffine, Daniel
Yonezawa, Hidemichi
Year of Publication: 
2016
Series/Report no.: 
Economics Working Paper Series 16/235
Abstract: 
A country's optimal environmental border policy includes a strategic component that is inconsistent with commitments under the General Agreement on Tariffs and Trade (GATT). We extend the theory to include GATT compliance. Theory supports optimal border adjustments on carbon content that are below the domestic carbon price, because price signals sent through border adjustments encourage consumption of emissions intensive goods in unregulated regions. The theory is supported in our applied numeric simulations. Countries imposing border adjustments at the domestic carbon price will be extracting rents from unregulated regions at the expense of efficient environmental policy and consistency with international trade law.
Subjects: 
climate policy
border tax adjustments
carbon leakage
trade and carbon taxes
JEL: 
F13
F18
Q54
Q56
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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