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Strategic Effects Of A Border Tax Adjustment

Author

Listed:
  • TERRY EYLAND

    (GERAD, HEC Montréal and Bishop's University, Canada)

  • GEORGES ZACCOUR

    (Chair in Game Theory and Management, GERAD, HEC Montréal, Canada)

Abstract

Carbon leakage and competitiveness concerns are some of the main reasons why an international environmental agreement is lacking to fight climate change. Many studies discussed the adoption of a border tax adjustment (BTA) to allow countries that would like to implement a carbon tax to level the playing field with imports. The big drawback from these studies is that the other country is not allowed to react by adopting itself a carbon tax to avoid being punished with the BTA. The model proposed in this paper looks at the optimization of two different governments and their respective firms. Parametric values inside the set [0, 1) are used to represent the possible extents of the BTA depending on both countries environmental policy allowing countries to have different carbon policies. The result that a BTA parameter of 0.5 yields the highest total welfare could increase its acceptance within the World Trade Organization (WTO).

Suggested Citation

  • Terry Eyland & Georges Zaccour, 2012. "Strategic Effects Of A Border Tax Adjustment," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(03), pages 1-22.
    • Handle: RePEc:wsi:igtrxx:v:14:y:2012:i:03:n:s0219198912500168
    DOI: 10.1142/S0219198912500168
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ximin (Natalie) Huang & Tarkan Tan & L. Beril Toktay, 2021. "Carbon Leakage: The Impact of Asymmetric Regulation on Carbon‐Emitting Production," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1886-1903, June.
    2. Jiali Zheng & Han Qiao & Shouyang Wang, 2017. "The Effect of Carbon Tax in Aviation Industry on the Multilateral Simulation Game," Sustainability, MDPI, vol. 9(7), pages 1-24, July.
    3. Al Khourdajie, Alaa & Finus, Michael, 2020. "Measures to enhance the effectiveness of international climate agreements: The case of border carbon adjustments," European Economic Review, Elsevier, vol. 124(C).
    4. 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.
    5. Alain-Désiré Nimubona & Horatiu Rus, 2015. "Green Technology Transfers and Border Tax Adjustments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 189-206, September.
    6. Tao, Zhang Gui & Guang, Zhong Yong & Hao, Sun & Song, Hu Jin & Xin, Dai Geng, 2015. "Multi-period closed-loop supply chain network equilibrium with carbon emission constraints," Resources, Conservation & Recycling, Elsevier, vol. 104(PB), pages 354-365.
    7. Ye Duan & Nan Li & Hailin Mu & Shusen Gui, 2017. "Research on CO 2 Emission Reduction Mechanism of China’s Iron and Steel Industry under Various Emission Reduction Policies," Energies, MDPI, vol. 10(12), pages 1-24, December.
    8. Eyland, Terry & Zaccour, Georges, 2014. "Carbon tariffs and cooperative outcomes," Energy Policy, Elsevier, vol. 65(C), pages 718-728.
    9. Xinxin Liao & Zhuo Ning, 2022. "Welfare Implications of Border Carbon Adjustments on the Trade of Harvested Wood Products," IJERPH, MDPI, vol. 20(1), pages 1-16, December.
    10. Melanie Hecht & Wolfgang Peters, 2019. "Border Adjustments Supplementing Nationally Determined Carbon Pricing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 93-109, May.

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    More about this item

    Keywords

    Game theory; border tax adjustment; international environmental agreements; competitiveness; carbon leakage;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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