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"Carbon Tariffs Revisited"

"Carbon Tariffs Revisited"

Discussion Paper 2014-64, Harvard Project on Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School

March 2014

Authors: Christoph Böhringer, André Müller, Jan Schneider

The Harvard Project on Climate Agreements Discussion Paper Series

Belfer Center Programs or Projects: Harvard Project on Climate Agreements

 

ABSTRACT

Concerns about adverse impacts on domestic energy-intensive and trade-exposed (EITE) industries are at the fore of the political debate about unilateral climate policies. Tariffs on the carbon embodied in imported goods from countries without emission pricing appeal as a measure to reduce carbon leakage and protect domestic EITE industries. We show that the introduction of carbon tariffs can do more harm than good to domestic EITE industries. Two determinants drive the sign and magnitude of EITE impacts. Firstly, the composition of embodied emissions in goods: if a large share of embodied carbon is imported in intermediate inputs, industries might suffer from carbon tariffs. Secondly, the share of domestic output that is supplied to the export market: while carbon tariffs level the playing field on domestic markets, they increase the cost-disadvantage vis-Ó-vis competitors from abroad in foreign markets.

 

For more information about this publication please contact the Harvard Project on Climate Agreements Coordinator at 617-496-8054.

For Academic Citation:

Böhringer, Christoph, André Müller, and Jan Schneider. "Carbon Tariffs Revisited." Discussion Paper 2014-64, Harvard Project on Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School, March 2014.

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