Why Carbon Border Adjustment Mechanisms Will Not Save the Planet But a Climate Club and Subsidies for Transformative Green Technologies May

37 Pages Posted: 23 Aug 2022 Last revised: 18 Jun 2023

See all articles by David G. Tarr

David G. Tarr

International School of Economics at Tbilisi State University

Dmitrii Kuznetsov

Russian Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA) - Institute of Applied Economic Research

Indra Overland

NUPI - Norwegian Institute of International Affairs; NUPI - Norwegian Institute for International Affairs

Roman Vakulchuk

NUPI - Norwegian Institute for International Affairs

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2023

Abstract

We find that both empirical results and economic theory show that carbon border adjustment mechanisms (CBAMs) will be ineffective at meeting global carbon emissions goals, but they are effective in improving the competitiveness of domestic industries who bear the costs of carbon pricing. We elaborate two complementary proposals that hold much greater promise for meeting climate goals: (i) a Climate Club, where member countries impose a minimum price of carbon emissions at home and a tariff surcharge on all imports from non-member countries; and (ii) a 0.2 percent of GDP subsidy by high-income countries for transformative research designed to make green energy cheaper than fossil fuels. We discuss multiple paths for a Climate Club to be accommodated within the rules of the World Trade Organization and recommend use of the Exception clause under GATT Article XX.

Keywords: carbon border adjustment, Climate Club, game-changing technologies, carbon leakage, World Trade Organization, Russia

Suggested Citation

Tarr, David G. and Kuznetsov, Dmitrii and Overland, Indra and Vakulchuk, Roman, Why Carbon Border Adjustment Mechanisms Will Not Save the Planet But a Climate Club and Subsidies for Transformative Green Technologies May (April 15, 2023). Available at SSRN: https://ssrn.com/abstract=4197784 or http://dx.doi.org/10.2139/ssrn.4197784

David G. Tarr (Contact Author)

International School of Economics at Tbilisi State University ( email )

16 Zandukeli Street
Tbilisi, 0108
Georgia

Dmitrii Kuznetsov

Russian Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA) - Institute of Applied Economic Research ( email )

Russia

Indra Overland

NUPI - Norwegian Institute of International Affairs ( email )

Oslo
Norway

NUPI - Norwegian Institute for International Affairs ( email )

Oslo
Norway

Roman Vakulchuk

NUPI - Norwegian Institute for International Affairs ( email )

Oslo
Norway

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