Coordinating Climate and Trade Policies: Pareto Efficiency and the Role of Border Tax Adjustments

 
Author/Editor: Keen, Michael ; Kotsogiannis, Christos
 
Publication Date: December 07, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether some form of border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distributional concerns that can make non-uniform carbon pricing efficient and, more particularly, that Pareto-efficiency requires a form of BTA when carbon taxes in some countries are constrained, a special case being identified in which this has the simple structure envisaged in practical policy discusions. It also stresses—a point that has been overlooked in the policy debate—that the efficiency case for BTA depends critically on whether climate policies are pursued by carbon taxation or by cap-and-trade.
 
Series: Working Paper No. 12/289
Subject(s): Climate policy | Trade policy | Tariff structures | Taxation | Economic models

 
English
Publication Date: December 07, 2012
ISBN/ISSN: 9781475552942/2227-8885 Format: Paper
Stock No: WPIEA2012289 Pages: 26
Price:
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