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Proposal for a national inventory adjustment for trade in the presence of border carbon adjustment: Assessing carbon tax policy in Japan

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  • Zhou, Xin
  • Yano, Takashi
  • Kojima, Satoshi

Abstract

In this paper we pointed out a hidden inequality in accounting for trade-related emissions in the presence of border carbon adjustment. Under a domestic carbon pricing policy, producers pay for the carbon costs in exchange for the right to emit. Under border carbon adjustment, however, the exporting country pays for the carbon costs of their exports to the importing country but not be given any emission credits. As a result, export-related emissions will be remained in the national inventory of the exporting country based on the UNFCCC inventory approach. This hidden inequality is important to climate policy but has not yet been pointed out. To address this issue we propose a method of National Inventory Adjustment for Trade, by which export-related emissions will be deducted from the national inventory of the exporting country and added to the national inventory of the importing country which implements border carbon adjustment. To assess the policy impacts, we simulated a carbon tax policy with border tax adjustment for Japan using a multi-region computable general equilibrium model. The results indicate that with the National Inventory Adjustment for Trade, both Japan′s national inventory and the carbon leakage effects of Japan′s climate policy will be greatly different.

Suggested Citation

  • Zhou, Xin & Yano, Takashi & Kojima, Satoshi, 2013. "Proposal for a national inventory adjustment for trade in the presence of border carbon adjustment: Assessing carbon tax policy in Japan," Energy Policy, Elsevier, vol. 63(C), pages 1098-1110.
    • Handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:1098-1110
    DOI: 10.1016/j.enpol.2013.09.016
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    References listed on IDEAS

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    1. Xin Zhou & Takashi Yano & Satoshi Kojima, 2011. "Addressing Carbon Leakage by Border Adjustment Measures," Chapters, in: Juan A. Blanco & Houshang Kheradmand (ed.), Climate Change - Research and Technology for Adaptation and Mitigation, IntechOpen.
    2. M. Lenzen & D. Moran & K. Kanemoto & B. Foran & L. Lobefaro & A. Geschke, 2012. "International trade drives biodiversity threats in developing nations," Nature, Nature, vol. 486(7401), pages 109-112, June.
    3. Trevor Houser & Rob Bradley & Britt Childs, 2008. "Leveling the Carbon Playing Field: International Competition and US Climate Policy Design," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4204, January.
    4. Warwick J. McKibbin & Peter J. Wilcoxen, 2009. "The economic and environmental effects of border tax adjustments for climate policy," CAMA Working Papers 2009-09, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Shiro Takeda & Horie Tetsuya & Toshi H. Arimura, 2012. "A Computable General Equilibrium Analysis Of Border Adjustments Under The Cap-And-Trade System: A Case Study Of The Japanese Economy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30.
    6. Wiedmann, Thomas, 2009. "A review of recent multi-region input-output models used for consumption-based emission and resource accounting," Ecological Economics, Elsevier, vol. 69(2), pages 211-222, December.
    7. van Asselt, Harro & Brewer, Thomas, 2010. "Addressing competitiveness and leakage concerns in climate policy: An analysis of border adjustment measures in the US and the EU," Energy Policy, Elsevier, vol. 38(1), pages 42-51, January.
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    Cited by:

    1. Weiguang Chen & Qing Guo, 2017. "Assessing the Effect of Carbon Tariffs on International Trade and Emission Reduction of China’s Industrial Products under the Background of Global Climate Governance," Sustainability, MDPI, vol. 9(6), pages 1-17, June.
    2. Lian-Biao Cui & Ma-Lin Song, 2017. "Designing and Forecasting the Differentiated Carbon Tax Scheme Based on the Principle of Ability to Pay," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-25, February.
    3. Banerjee, Suvajit, 2020. "Border vis-à-vis Domestic Carbon Adjustment: Implications of Alternative System Boundary for India to Reduce Carbon Emissions," Conference papers 333129, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Ma, Xuejiao & Wang, Yong & Wang, Chen, 2017. "Low-carbon development of China's thermal power industry based on an international comparison: Review, analysis and forecast," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 942-970.

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