Reconciling Climate Change and Trade Policy

There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. The authors confirm the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects. However, output and exports of energy-intensive manufactures are projected to decline potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Their quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China s manufacturing exports would decline by one-fifth and those of all low and middle income countries by 8 per cent; the corresponding declines in real income would be 3.7 per cent and 2.4 per cent. Border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.

Bibliographic Details

Main Authors:	Mattoo, Aaditya, Subramanian, Arvind, van der Mensbrugghe, Dominique, He, Jianwu
Language:	English
Published:	2009-11-01
Subjects:	AGGREGATE DEMAND, AGGREGATE EMISSIONS, ALLOCATION, ALLOWANCE, ALLOWANCE PROVISION, ALUMINUM, ATMOSPHERE, ATMOSPHERIC CONCENTRATION, ATMOSPHERIC CONCENTRATIONS, BASELINE EMISSIONS, BASES, BILATERAL TRADE, CAR, CARBON, CARBON ABATEMENT, CARBON CAPTURE, CARBON CONTENT, CARBON CONTENT OF ENERGY, CARBON DIOXIDE, CARBON EMISSION, CARBON EMISSIONS, CARBON FERTILIZATION, CARBON INTENSITY, CARBON LEAKAGE, CARBON OFFSETS, CARBON PRICE, CARBON PRICES, CARBON TAX, CARBON TAXES, CARS, CEMENT INDUSTRY, CH4, CLEAN ENERGY, CLIMATE, CLIMATE CHANGE, CLIMATE POLICIES, CLIMATE POLICY, CO2, COAL, COAL SUPPLY, COMBUSTION, CONSERVATION, CONSUMER DEMAND, COST OF PRODUCTION, CRUDE OIL, CULTIVATED LAND, DEMAND ELASTICITY, DOMESTIC CARBON, DOMESTIC EMISSIONS, DOMESTIC PRODUCTION, DRIVERS, ECONOMIC MODEL, ECONOMIC MODELS, ELASTICITIES, ELASTICITY OF SUBSTITUTION, ELECTRICITY, ELECTRICITY PRODUCTION, EMISSION, EMISSION ABATEMENT, EMISSION ALLOWANCES, EMISSION COEFFICIENTS, EMISSION LIMITS, EMISSION REDUCTION, EMISSION REDUCTIONS, EMISSION TAXES, EMISSIONS, EMISSIONS ALLOWANCES, EMISSIONS CUTS, EMISSIONS LEAKAGE, EMISSIONS LEVELS, EMISSIONS REDUCTION, EMISSIONS REDUCTIONS, EMISSIONS SCENARIOS, EMISSIONS TAXES, END-USER PRICE, ENERGY DEMAND, ENERGY EFFICIENCY, ENERGY GOODS, ENERGY INTENSIVE, ENERGY INTENSIVE MANUFACTURING, ENERGY MARKET, ENERGY MARKETS, ENERGY POLICY, ENERGY PRICES, ENERGY TECHNOLOGIES, ENERGY-INTENSIVE GOODS, ENERGY-INTENSIVE MANUFACTURING, ENVIRONMENTAL IMPACT, ENVIRONMENTAL POLICY, ENVIRONMENTAL STANDARDS, EXCHANGE RATE, EXTERNALITIES, EXTREME SCENARIO, F-GASES, FATS, FERROUS METALS, FINANCIAL FLOWS, FORESTRY, FOSSIL FUEL, FOSSIL FUELS, FREE ALLOWANCES, FREE EMISSION, FREE TRADE, FUEL SUBSIDIES, FUEL SUBSTITUTION, FUEL SUPPLY, GCM, GENERAL EQUILIBRIUM MODEL, GHG, GHGS, GLOBAL CLIMATE CHANGE, GLOBAL EMISSIONS, GLOBAL ENVIRONMENT, GLOBAL ENVIRONMENTAL CONCERNS, GLOBAL WARMING, GREENHOUSE, GREENHOUSE GAS, GREENHOUSE GAS MITIGATION, GREENHOUSE GASES, HIGH ENERGY, HYDROFLUOROCARBONS, IMPORTS, INCOME, INJURY, INORGANIC CHEMICALS, INTERNATIONAL ENERGY AGENCY, INVESTMENT DECISIONS, IPCC, IRON, JOBS, LEVEL OF EMISSIONS, LUMP SUM, MARGINAL ABATEMENT, METHANE, METHANE EMISSIONS, MOBILITY, MOTOR VEHICLES, N2O, NATURAL GAS, NATURAL RESOURCES, NEGATIVE IMPACT, NITROUS OXIDE, NUCLEAR POWER, O3, OIL EQUIVALENT, OIL PRICE, OILS, OUTPUT DECLINES, PAPER PRODUCTS, PER CAPITA INCOMES, PETROCHEMICALS, PLANT GROWTH, PLASTICS, POLICY IMPLICATIONS, POWER GENERATION, POWER SECTOR, PP, PRICE CHANGES, PRICE OF EMISSIONS, PRICE OF OIL, PROBABILITY DISTRIBUTION, PUBLIC TRANSPORTATION, QUANTITATIVE ANALYSIS, RADIATIVE FORCING, REBATES, REDUCTION IN EMISSIONS, REFINED OIL, RENEWABLE TECHNOLOGIES, REVENUE RECYCLING, SHADOW PRICE, SUGAR CANE, TAX REVENUE, TAX REVENUES, TEMPERATURE, TEMPERATURE CHANGE, TRADE IMPACTS, TRADE RESPONSES, TRADING PARTNERS, TRANSPORT, TRANSPORT EQUIPMENT, TRANSPORTATION, TRUE, WASTE, WELFARE CONSEQUENCES, WIND, WOOD PRODUCTS, WORLD EMISSIONS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091112173455 https://hdl.handle.net/10986/4319
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