Border Carbon Adjustments with Endogenous Assembly Locations

No HIAS-E-111, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: In this study, we develop a two-country model to examine whether border carbon adjustments (BCAs) are more effective than emission tax alone in preventing carbon leakage and decreasing global emissions with endogenous assembly locations. Specifically, we explore three policy regimes: i) emission taxes alone (no BCAs), ii) emission taxes and carbon-content tariffs (partial BCAs), and iii) emission taxes, carbon-content tariffs, and tax rebates on exports (full BCAs). We find that the effectiveness of BCAs depends on whether BCAs induce assembly relocation. If assembly relocation does not occur, BCAs prevent carbon leakage and decrease global emissions. However, if BCAs induce assembly relocation, carbon leakage may occur with partial BCAs, and global emissions may be higher with full BCAs.

Keywords: Abatement Investments; Border Carbon Adjustments; Carbon Leakage; Endogenous Assembly Locations; International Oligopoly (search for similar items in EconPapers)
JEL-codes: F18 H23 Q54 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-08
New Economics Papers: this item is included in nep-env, nep-int and nep-isf
Note: This version: August 25, 2021
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/72220/070_hiasDP-E-111.pdf

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Journal Article: Border carbon adjustments with endogenous assembly locations (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-111

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