Coordinating Climate and Trade Policies Pareto Efficiency and the Role of Border Tax Adjustments

This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether some form of border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distribut...

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Bibliographic Details
Main Author: Keen, Michael
Other Authors: Kotsogiannis, Christos
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2012
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Environmental Economics: General 
653 |a Environmental Policy 
653 |a Tariff 
653 |a Tariffs 
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653 |a International Trade Organizations 
653 |a Environmental Economics 
653 |a Environmental economics 
653 |a Public finance & taxation 
653 |a Taxes 
653 |a Environmental impact charges 
653 |a Environment 
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653 |a Carbon tax 
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653 |a Taxation, Subsidies, and Revenue: General 
653 |a Emissions trading 
653 |a Taxation 
653 |a Taxation and Subsidies: Externalities 
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520 |a This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether some form of border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distributional concerns that can make non-uniform carbon pricing efficient and, more particularly, that Pareto-efficiency requires a form of BTA when carbon taxes in some countries are constrained, a special case being identified in which this has the simple structure envisaged in practical policy discusions. It also stresses—a point that has been overlooked in the policy debate—that the efficiency case for BTA depends critically on whether climate policies are pursued by carbon taxation or by cap-and-trade