Mitigating carbon leakage: combining output-based rebating with a consumption tax

Unilateral climate policy induces carbon leakage through the relocation of emission-intensive and trade-exposed industries to regions with no or more lenient emission regulation. Both analytical and numerical studies suggest that emission pricing combined with border carbon adjustments may be a seco...

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Bibliographic Details
Main Authors: Böhringer, Christoph (Author), Rosendahl, Knut Einar 1967- (Author), Storrøsten, Halvor Briseid (Author)
Format: Electronic eBook
Language:English
Published: Oldenburg University of Oldenburg, Department of Economics May 2015
Series:V 380
Online Access:Volltext
Summary:Unilateral climate policy induces carbon leakage through the relocation of emission-intensive and trade-exposed industries to regions with no or more lenient emission regulation. Both analytical and numerical studies suggest that emission pricing combined with border carbon adjustments may be a second-best instrument, and more cost-effective than output-based rebating, in which case domestic output is indirectly subsidized. No countries have so far imposed border carbon adjustments, while variants of output-based rebating have been implemented. In this paper we demonstrate that it is welfare improving for a region who has already implemented emission pricing along with output-based rebating for emission-intensive and trade-exposed goods to also introduce a consumption tax on these goods. Moreover, we show that combining output-based rebating with a consumption tax can be equivalent with border carbon adjustments.
Physical Description:1 Online-Ressource (37 Seiten) Diagramme