Global Welfare Implications of Carbon Border Taxes

CEPS Working Document No. 315

19 Pages Posted: 8 Jul 2009

See all articles by Daniel Gros

Daniel Gros

Centre for European Policy Studies, Brussels; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: July 6, 2009

Abstract

This paper presents a simple, basic model to compute the welfare consequences of the introduction of a tariff on the CO2 content of imported goods in a country that already imposes a domestic carbon tax. The main finding is that the introduction of a carbon import tariff increases global welfare (and not just the welfare of the importing country) if there is no (or insufficient) pricing of carbon abroad. A higher domestic price of carbon justifies a higher import tariff. Moreover, a higher relative intensity of carbon abroad increases the desirability of high import tariff imposed by the home country because a border tax shifts production to the importing country, which in this case leads to lower environmental costs.

Keywords: Climate Change, Carbon, CO2, Global Welfare

Suggested Citation

Gros, Daniel, Global Welfare Implications of Carbon Border Taxes (July 6, 2009). CEPS Working Document No. 315. Available at SSRN: https://ssrn.com/abstract=1430327 or http://dx.doi.org/10.2139/ssrn.1430327

Daniel Gros (Contact Author)

Centre for European Policy Studies, Brussels ( email )

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Belgium

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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