Mitigating carbon leakage: Combining output-based rebating with a consumption tax

Arbeitspapier

Unilateral climate policy induces carbon leakage through the relocation of emission-intensive and trade-exposed industries to regions with no or more lenient emission regulation. Both analytical and numerical studies suggest that emission pricing combined with border carbon adjustments may be a second-best instrument, and more cost-effective than output-based rebating, in which case domestic output is indirectly subsidized. No countries have so far imposed border carbon adjustments, while variants of output-based rebating have been implemented. In this paper we demonstrate that it is welfare improving for a region who has already implemented emission pricing along with output-based rebating for emission-intensive and trade-exposed goods to also introduce a consumption tax on these goods. Moreover, we show that combining output-based rebating with a consumption tax can be equivalent with border carbon adjustments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Oldenburg Discussion Papers in Economics ; No. V-380-15

Classification and Topics

• Classification: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: carbon leakage ; output-based rebating ; border carbon adjustments ; consumption tax

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Böhringer, Christoph ; Rosendahl, Knut Einar ; Storrøsten, Halvor Briseid
• Event: Veröffentlichung
• (who): University of Oldenburg, Department of Economics
• (where): Oldenburg
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/121752
• Last update: 10.03.2025, 11:41 AM CET