Publication: Leveling or Mining the Playing Field? Implementation Problems of Carbon-Motivated Border Adjustment Taxes
Date
2009-12
ISSN
Published
2009-12
Author(s)
Jensen, Michael Friis
Abstract
Climate change policies and trade policy
are on a collision course. Border tax adjustments are at the
center of the debate and are being considered in many
Organization for Economic Co-operation and Development
(OECD) countries, notably the United States and the European
Union (EU). They will tax carbon emissions at the border
with the aim of leveling the playing field between countries
with different carbon emission limits. Border tax
adjustments may be justified theoretically, but the
challenges of implementation and its associated costs and
incentives are a key determinant of the outcome.
Implementation depends on complex administrative
arrangements and controversial calculations of the embedded
carbon in imported goods. Border tax adjustment schemes
might mine rather than level the playing field.
Implementation problems invite vested interests to influence
the policy process and divert border adjustment taxes
towards protectionist uses. Decision makers and academics
alike have produced little evidence on implementation
problems but appear to discuss the very complex border tax
adjustment scheme with the implicit assumption that
implementation problems can be solved if the need arises.
The implementation problems are linked to the difficulties
of calculating embedded carbon. This paper discusses a key
question: how accurately can we measure embedded carbon and
what will the inherent uncertainty do to trade policy when
it triggers political economy forces?
Citation
“Jensen, Michael Friis. 2009. Leveling or Mining the Playing Field? Implementation Problems of Carbon-Motivated Border Adjustment Taxes. PREM Notes; No. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/9fb975b3-4c06-566d-9b53-f6b9fd9fba11 License: CC BY 3.0 IGO.”