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Border Adjustments for Carbon Emissions: Basic Concepts and Design

Author

Listed:
  • Weisbach, David

    (The University of Chicago Law School)

  • Kortum, Sam

Abstract

We consider the economics and the design of border adjustments (BAs) under a carbon tax. BAs are taxes on imports and rebates on exports on the emissions from the production of a good. They are thought to be a method of reducing inefficiencies from a unilateral carbon price, such as shifts in the location of production, known as leakage. After examining the basic economics of BAs, we examine three design issues: which goods BAs should apply to, which emissions from the production of those goods should be taxed, and from and to which countries BAs should apply. We conclude that BAs will impose high administrative costs and need strong welfare justifications.

Suggested Citation

  • Weisbach, David & Kortum, Sam, 2016. "Border Adjustments for Carbon Emissions: Basic Concepts and Design," RFF Working Paper Series dp-16-09, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-16-09
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    File URL: http://www.rff.org/research/publications/border-adjustments-carbon-emissions-basic-concepts-and-design
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    Citations

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    Cited by:

    1. Haibara, Takumi, 2024. "Trade disputes and the climate," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 732-741.
    2. Joseph S Shapiro, 2021. "The Environmental Bias of Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 831-886.
    3. Zhang, Zengkai & Zhu, Kunfu, 2017. "Border carbon adjustments for exports of the United States and the European Union: Taking border-crossing frequency into account," Applied Energy, Elsevier, vol. 201(C), pages 188-199.
    4. Banerjee, Suvajit, 2021. "Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 68-86.
    5. Strand,Jon, 2021. "Incentivizing Carbon Taxation in Low-Income Countries : Tax Rebating versus Carbon Crediting," Policy Research Working Paper Series 9698, The World Bank.

    More about this item

    Keywords

    carbon taxes; leakage; border adjustments;
    All these keywords.

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