Border Adjustments for Carbon Emissions: Basic Concepts and Design

Resources for the Future Discussion Paper 16-09

43 Pages Posted: 3 Jun 2016

See all articles by Samuel S. Kortum

Samuel S. Kortum

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

David A. Weisbach

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

Date Written: March 11, 2016

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.

Keywords: Carbon Taxes, Leakage, Border Adjustments

Suggested Citation

Kortum, Samuel S. and Weisbach, David, Border Adjustments for Carbon Emissions: Basic Concepts and Design (March 11, 2016). Resources for the Future Discussion Paper 16-09. Available at SSRN: https://ssrn.com/abstract=2789773 or http://dx.doi.org/10.2139/ssrn.2789773

Samuel S. Kortum (Contact Author)

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
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David Weisbach

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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