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http://ssrn.com/abstract=1995888
 
 

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Unilateral Carbon Taxes, Border Adjustments and Carbon Leakage


Joshua Elliott


University of Chicago; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Ian Foster


University of Chicago; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Samuel S. Kortum


University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Gita Khun Jush


University of Chicago; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Todd Munson


Argonne National Laboratory; University of Chicago

David A. Weisbach


University of Chicago - Law School; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

January 27, 2012

RDCEP Working Paper No. 12-04

Abstract:     
We examine the impact of a unilateral carbon tax in developed countries focusing on the expected size of carbon leakage (an increase in emissions in non-taxing regions as a result of the tax) and the effects on leakage of border tax adjustments. We start by analyzing the problem using a simple two-country, three-good general equilibrium model to develop intuitions. We then simulate the expected size of the effects using a new, open-source, computable general equilibrium (CGE) model. We analyze the extent of emissions reductions from a carbon tax in countries that made commitments under the Kyoto Protocol (Annex B countries), the expected carbon leakage, and the effects of border tax adjustments on carbon leakage, all relative to our baseline projections for emissions. We also perform extensive sensitivity tests on the parameters of the CGE model. Finally, we consider the effects of imperfect border tax adjustments on leakage, such as global or regional schedules of border taxes.

Number of Pages in PDF File: 44

Keywords: carbon leakage, carbon taxes, climate change, Kyoto Protocol, CGE modeling

JEL Classification: C68, F18, H23, K32, Q54

working papers series





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Date posted: February 1, 2012 ; Last revised: March 1, 2012

Suggested Citation

Elliott, Joshua and Foster, Ian and Kortum, Samuel S. and Khun Jush, Gita and Munson, Todd and Weisbach, David A., Unilateral Carbon Taxes, Border Adjustments and Carbon Leakage (January 27, 2012). RDCEP Working Paper No. 12-04. Available at SSRN: http://ssrn.com/abstract=1995888 or http://dx.doi.org/10.2139/ssrn.1995888

Contact Information

Joshua Elliott
University of Chicago ( email )
1101 East 58th Street
Chicago, IL 60637
United States
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

Ian Foster
University of Chicago ( email )
1101 East 58th Street
Chicago, IL 60637
United States
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

Samuel S. Kortum
University of Chicago - Department of Economics ( email )
1126 East 59th Street
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Gita Khun Jush
University of Chicago ( email )
1101 East 58th Street
Chicago, IL 60637
United States
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

Todd Munson
Argonne National Laboratory ( email )
9700 S. Cass Avenue
Argonne, IL 60439
United States
University of Chicago ( email )
1101 East 58th Street
Chicago, IL 60637
United States
David Weisbach (Contact Author)
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-3342 (Phone)
773-702-0730 (Fax)
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

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