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Carbon Pricing and Border Tax Adjustment: the Compatibility with WTO Rules

Author

Listed:
  • Alberto Majocchi

    (Professor Emeritus of Public Finance at the University of Pavia)

Abstract

There is currently broad consensus that the most cost-effective instrument to address the global warming problem is a worldwide carbon tax with a uniform rate since the reduction in carbon dioxide emissions will take place where abatement costs are lower. However, if this solution is not feasible in the short run, since some major countries cannot accept the same increase in energy taxation, unilateral initiatives are needed. In this case, border tax adjustments should be adopted to prevent the protection of the global commons from aggravating competitive conditions for the most environmentally-friendly countries. Furthermore, taxing goods at the border according to their carbon content is a prerequisite for the political acceptability of the carbon tax, ensuring that environmental protection does not significantly damage economic growth. This paper emphasises that the border tax adjustment not only increases global welfare, but also could be shaped so that it is compatible with WTO rules.

Suggested Citation

  • Alberto Majocchi, 2018. "Carbon Pricing and Border Tax Adjustment: the Compatibility with WTO Rules," Research Papers 467, Fondazione Centro Studi sul Federalismo.
    • Handle: RePEc:azz:rpaper:467
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    File URL: https://www.csfederalismo.it/images/Research_paper/CSF-RP_AMajocchi_Border-Tax-Adjustment_February2018.pdf
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    More about this item

    Keywords

    Border tax; Carbon Tax; CO2 emissions; Emissions Trading Scheme; European Union; global warming; Kyoto Agreement; WTO;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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