Skip to main content Accessibility help
×
Home

On the strategic use of border tax adjustments as a second-best climate policy measure

  • Charles F. Mason (a1), Edward B. Barbier (a2) and Victoria I. Umanskaya (a3)

Abstract

We investigate the interaction between a developed country that imports a carbon-intensive product, such as electricity, and a transitioning economy that exports the product. Production of the good generates a transboundary externality related to climate change; if this externality is priced improperly, the application of a feed-in tariff or border tax adjustment can provide an indirect policy instrument. We analyze the application of such a measure in a stark model where the importing country cares about climate-related damages while the exporting country does not; this can be viewed as reflecting a scenario where the (developed) importing country is more concerned about climate change than is the (transitioning) exporting economy. Because climate change will occur over a long time frame, the problem is dynamic. In this modeling context, we describe the manner in which the (second-best) tariff-cum-border tax adjustment relates to the carbon stock.

Copyright

References

Hide All
Baumol, W. and Oates, W. (1988), The Theory of Environmental Policy, Cambridge: Cambridge University Press.
Bayramoglu, B. (2006), ‘Transboundary pollution in the Black Sea: comparison of institutional arrangements’, Environmental and Resource Economics 35: 289325.
Biermann, F. and Brohm, R. (2005), ‘Implementing the Kyoto Protocol without the United States: the strategic role of energy tax adjustments at the border’, Climate Policy 4: 289302.
Boyce, W. and DiPrima, R. (2005), Elementary Differential Equations and Boundary Value Problems, Cambridge: John Wiley & Sons.
Cabo, F., Escudero, E., and Martin-Herran, G. (2001), ‘Self-enforcing agreement on transboundary pollution and international trade: a differential game’, Global Business and Economics Review – Anthology 5: 637646.
Cabo, F., Escudero, E., and Martin-Herran, G. (2006), ‘A time-consistent agreement in an interregional differential game on pollution and trade’, International Game Theory Review 8: 369393.
Copeland, B.R. (1994), ‘International trade and the environment: policy reform in a polluted small open economy’, Journal of Environmental Economics and Management 26: 4465.
Copeland, B.R. (1996), Pollution content tariffs, environmental rent shifting, and the control of cross-border pollution, Journal of International Economics 40: 459476.
Dockner, E., Jorgensen, S., van Long, N., and Sorger, G. (2000), Differential Games in Economics and Management Science, Cambridge: Cambridge University Press.
Dockner, E. and van Long, N. (1993), ‘International pollution control: cooperative versus non-cooperative strategies’, Journal of Environmental Economics and Management 25: 1329.
Fernandez, L. (2002), ‘Trade's dynamic solutions to transboundary pollution’, Journal of Environmental Economics and Management 43: 386411.
Hakim, D. (2013), ‘Bulgaria's air is dirtiest in Europe, study finds, followed by Poland’, New York Times 15 October: B30.
Karp, L. (1992), ‘Social welfare in a common property oligopoly’, International Economic Review 33: 353372.
List, J. and Mason, C.F. (2001), ‘Optimal institutional arrangements for transboundary pollutants in a second-best world: evidence from a differential game with asymmetric players’, Journal of Environmental Economics and Management 42: 277296.
Maler, K. and de Zeeuw, A. (1998), ‘The acid rain differential game’, Environmental and Resource Economics 12: 167184.
Markusen, J. (1975a), ‘Cooperative control of international pollution and common property resources’, Quarterly Journal of Economics 89: 618632.
Markusen, J. (1975b). ‘International externalities and optimal tax structures’, Journal of International Economics 5: 1529.
Mason, C.F. and Polasky, S. (1997), ‘The optimal number of firms in the commons: a dynamic approach’, Canadian Journal of Economics 30: 11431160.
Mason, R. (1997), ‘Dynamic pollution games’, Nuffield College Economic Preprint No. 129, Nuffield College, Oxford.
Parry, I. and Oates, W. (2000), ‘Policy analysis in the presence of distorting taxes’, Journal of Policy Analysis and Management 19: 603613.
Snape, H. (1992), ‘The environment, international trade and competitiveness’, in Anderson, K. and Blackhurst, R. (eds), The Greening of World Trade Issues, Ann Arbor, MI: University of Michigan Press pp. 7392.
Weitzel, M., Hübler, M., and Peterson, S. (2012), ‘Fair, optimal or detrimental? Environmental vs. strategic use of border carbon adjustment’, Energy Economics 34: S198S207.
Yanase, A. (2007), ‘Dynamic games of environmental policy in a global economy: taxes versus quotas’, Review of International Economics 15: 592611.
Yanase, A. (2010), ‘Trade, strategic environmental policy, and global pollution’, Review of International Economics 18: 493512.
Type Description Title
PDF
Supplementary materials

Mason Supplementary Material
Appendix

 PDF (146 KB)
146 KB

On the strategic use of border tax adjustments as a second-best climate policy measure

  • Charles F. Mason (a1), Edward B. Barbier (a2) and Victoria I. Umanskaya (a3)

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed