IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/332167.html
   My bibliography  Save this paper

The welfare effects of Reversed Border Tax Adjustments as a remedy under unilateral environmental taxation: A South African case study

Author

Listed:
  • Seymore, R.
  • Mabugu, M.
  • Van Heerden, J.H.

Abstract

Border Tax Adjustments (BTAs) resurfaced recently in national policy debates as a possible measure to counter the anti-competitiveness effect of unilateral environmental taxes. There seems to be no consensus in the literature on the effectiveness of BTAs under environmental taxes. This paper aims firstly to provide a theoretical Heckscher-Ohlin analysis that not only challenges the effectiveness of BTAs, but also proposes an alternative approach to mitigate the welfare effects of environmental taxes. Secondly, the paper evaluate the effectiveness of the alternative approach, to negate the economic impact on competitiveness of an electricity generation tax, without sacrificing the environmental benefits of the tax, in the case of South Africa. Using conventional Heckscher-Ohlin methodology, in a small country, we show that policy makers should, instead of implementing BTAs, consider the opposite of BTAs to mitigate the welfare effects of environmental taxes. We show that gains from trade, due to a reduction in import tariffs, could, under certain assumptions, offset the initial tax induced welfare loss. The paper then applies the Global Trade Analysis Project (GTAP) model to evaluate the impact of an electricity generation tax on the South African, SACU and SADC economies and explores the possibility to reduce the economic impact of the electricity generation tax through traditional border tax adjustments. The results show that an electricity generation tax will lead to a contraction of the South African gross domestic product. However, traditional BTAs are unable to address these negative impacts. The paper then test the proposed reversed BTA approach where gains from trade are utilised to negate the negative impacts of an electricity generation tax, while retaining the environmental benefits associated with the electricity generation tax. This is achieved through a reduction in import tariffs, as this reduction will reduce production costs and thereby restore the competitiveness of South Africa. The reduction in import tariffs not only negates the negative GDP impact of the electricity generation tax, but most the CO2 abatement from the electricity generation tax is retained.

Suggested Citation

  • Seymore, R. & Mabugu, M. & Van Heerden, J.H., 2011. "The welfare effects of Reversed Border Tax Adjustments as a remedy under unilateral environmental taxation: A South African case study," Conference papers 332167, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332167
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/332167/files/5205.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    2. Ludena, Carlos E. & Hertel, Thomas W. & Preckel, Paul V. & Foster, Kenneth A. & Nin Pratt, Alejandro, 2006. "Productivity Growth and Convergence in Crop, Ruminant and Non-Ruminant Production: Measurement and Forecasts," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25392, International Association of Agricultural Economists.
    3. Warwick J. McKibbin & Andrew Stoeckel, 2009. "Modelling the global financial crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(4), pages 581-607, Winter.
    4. Markus Lips & Peter Rieder, 2005. "Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 1-17, March.
    5. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    6. D Moro & P Sckokai, 2000. "Heterogeneous preferences in household food consumption in Italy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(3), pages 305-323, September.
    7. Burniaux, Jean-March & Truong, Truong P., 2002. "Gtap-E: An Energy-Environmental Version Of The Gtap Model," Technical Papers 28705, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bourne, M. & Philippidis, G. & Quiroga, S. & Fernandez-Haddad, Z., 2013. "Kyoto and Mañana: A CGE analysis of Spanish Greenhouse Gas targets to 2020," Conference papers 332344, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Hertel, Thomas W. & Tyner, Wallace E. & Birur, Dileep K., 2008. "Biofuels for all? Understanding the Global Impacts of Multinational Mandates," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6526, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Britz, Wolfgang & Li, Jingwen & Shang, Linmei, 2021. "Combining large-scale sensitivity analysis in Computable General Equilibrium models with Machine Learning: An Example Application to policy supporting the bio-economy," Conference papers 333285, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Huang, Jikun & Yang, Jun & Msangi, Siwa & Rozelle, Scott & Weersink, Alfons, 2012. "Biofuels and the poor: Global impact pathways of biofuels on agricultural markets," Food Policy, Elsevier, vol. 37(4), pages 439-451.
    5. Francesco Bosello & Lorenza Campagnolo & Raffaello Cervigni & Fabio Eboli, 2018. "Climate Change and Adaptation: The Case of Nigerian Agriculture," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 787-810, April.
    6. Michetti, Melania & Parrado, Ramiro, 2012. "Improving Land-use modelling within CGE to assess Forest-based Mitigation Potential and Costs," Climate Change and Sustainable Development 122862, Fondazione Eni Enrico Mattei (FEEM).
    7. Escobar, Neus & Haddad, Salwa & Britz, Wolfgang, 2018. "Economic and environmental implications of a target for bioplastics consumption: A CGE analysis," Conference papers 332940, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Haddad, Salwa & Britz, Wolfgang & Börner, Jan, 2017. "Impacts Of Increased Forest Biomass Demand In The European Bioeconomy," 57th Annual Conference, Weihenstephan, Germany, September 13-15, 2017 261986, German Association of Agricultural Economists (GEWISOLA).
    9. Gohin, A. & Chantret, F., 2010. "The long-run impact of energy prices on world agricultural markets: The role of macro-economic linkages," Energy Policy, Elsevier, vol. 38(1), pages 333-339, January.
    10. Britz, Wolfgang & van der Mensbrugghe, Dominique, 2017. "A flexible, modular and extendable framework for CGE analysis in GAMS," Conference papers 332918, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Childs, Jack, 2012. "Kyoto and the EU CEP 2020: A Dynamic Study of the impacts on the Agricultural Sector in Spain," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 135074, Agricultural Economics Society.
    12. Beckman, Jayson & Hertel, Thomas & Tyner, Wallace, 2011. "Validating energy-oriented CGE models," Energy Economics, Elsevier, vol. 33(5), pages 799-806, September.
    13. Dixon, Peter B. & Rimmer, Maureen T., 2009. "Simulating the U.S. recession," Conference papers 331862, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Jun Yang & Huanguang Qiu & Jikun Huang & Scott Rozelle, 2008. "Fighting global food price rises in the developing world: the response of China and its effect on domestic and world markets," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 453-464, November.
    15. Chantret, Francois & Gohin, Alexandre, 2009. "The Long-Run Impact of Energy Prices on World Agricultural Markets: The Role of Macro-Economic Linkages," 2009 Conference, August 16-22, 2009, Beijing, China 51560, International Association of Agricultural Economists.
    16. Wolfgang Britz & Dominique van der Mensbrugghe, 2018. "CGEBox: A Flexible, Modular and Extendable Framework for CGE Analysis in GAMS," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 3(2), pages 106-177, December.
    17. Alvaro Calzadilla & Katrin Rehdanz & Richard S.J. Tol, 2008. "The Eonomic Impact Of More Sustainable Water Use In Agriculture: A Computable General Equilibrium Analysis," Working Papers FNU-169, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2008.
    18. Hoefnagels, Ric & Banse, Martin & Dornburg, Veronika & Faaij, André, 2013. "Macro-economic impact of large-scale deployment of biomass resources for energy and materials on a national level—A combined approach for the Netherlands," Energy Policy, Elsevier, vol. 59(C), pages 727-744.
    19. Arndt Feuerbacher & Jonas Luckmann, Humboldt-University of Berlin, 2017. "Modelling field operations in a computable general equilibrium model: An application to labour shortages in Bhutan," EcoMod2017 10464, EcoMod.
    20. Dihel, Nora, 2005. "Impact of services barriers on effective rates of protection in agriculture and manufacturing," Conference papers 331387, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:332167. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.