AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Border Carbon Adjustments When Carbon Intensity Varies across Producers: Evidence from California
AEA Papers and Proceedings
vol. 111,
May 2021
(pp. 401–05)
Abstract
Governments taxing carbon emissions within their jurisdiction can impose a commensurate tax on emissions embodied in imports in order to mitigate emissions leakage. California offers a rare opportunity to investigate how such a border carbon adjustment (BCA) is working in practice. Experience to date highlights important tensions between greenhouse gas accounting accuracy, market efficiency, and concerns about trade protectionism. We simulate electricity market outcomes under BCA designs that differ in terms of how the carbon intensity of imports is assessed. Simulations suggest significant potential for leakage via resource shuffling. Realized emissions outcomes indicate that this potential has not been fully realized.Citation
Fowlie, Meredith, Claire Petersen, and Mar Reguant. 2021. "Border Carbon Adjustments When Carbon Intensity Varies across Producers: Evidence from California." AEA Papers and Proceedings, 111: 401–05. DOI: 10.1257/pandp.20211073Additional Materials
JEL Classification
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
- Q58 Environmental Economics: Government Policy