Trade in Carbon and the Effectiveness of Carbon Tariffs

43 Pages Posted: 12 Sep 2016

See all articles by Christoph Böhringer

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Jan Schneider

University of Oldenburg; ZenTra - Center for Transnational Studies

Emmanuel Asane-Otoo

University of Oldenburg

Date Written: September 12, 2016

Abstract

Carbon-based import tariffs are discussed as policy measures to reduce carbon leakage and increase the global cost-effectiveness of unilateral CO2 emission pricing. We assess how the potential of carbon tariffs to increase cost-effectiveness of unilateral climate policy depends on the magnitude and composition of carbon embodied in trade. For our assessment, we combine multi-region input-output (MRIO) analysis with computable general equilibrium (CGE) analysis based on data from the World Input-Output Database (WIOD) for the period 1995 to 2007. The MRIO analysis confirms that carbon embodied in trade has sharply increased during this period. Yet, the CGE analysis suggests that the effectiveness of carbon tariffs in reducing leakage and improving global-cost effectiveness of unilateral climate policy does not increase over time, whereas the potential to shift the economic burden of CO2 emissions reduction from abating developed regions to non-abating developing regions increases substantially.

Keywords: carbon tariffs, unilateral climate policy, computable general

JEL Classification: Q58, D57, D58

Suggested Citation

Bohringer, Christoph and Schneider, Jan and Asane-Otoo, Emmanuel, Trade in Carbon and the Effectiveness of Carbon Tariffs (September 12, 2016). ZenTra Working Paper in Transnational Studies No. 65 / 2016, Available at SSRN: https://ssrn.com/abstract=2837699

Christoph Bohringer (Contact Author)

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Jan Schneider

University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

ZenTra - Center for Transnational Studies ( email )

Ammerländer Heerstraße 138
Oldenburg, 26131
Germany

Emmanuel Asane-Otoo

University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

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