We explore conditions determining which anti-leakage policies might be more effective complements to regulation of domestic greenhouse gas emissions. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border charge on imports, a border rebate for exports, full border adjustment, and domestic output-based rebating. Each option faces different potential legal hurdles in international trade law; each also has different economic impacts. While all can support competitiveness, none is necessarily effective at reducing global emissions. Nor is it possible to rank the options; effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes. We illustrate these results with simulations for the energy-intensive sectors of three different economies- the United States, Canada, and Europe. Although most controversial, full border adjustment is usually most effective, but output-based rebating for key manufacturing sectors can achieve many of the gains.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1345928_code1108470.pdf?abstractid=1345928&mirid=1

Comparing Policies to Combat Emissions Leakage: Border Carbon Adjustments versus Rebates

https://epub.wupperinst.org/files/6984/6984_Bataille.pdf

A review of technology and policy deep decarbonization pathway options for making energy-intensive industry production consistent with the Paris Agreement

We consider the design of a tax on greenhouse gas emissions for a developed country such as the United States. We consider three sets of issues: the optimal tax base, issues relating to the rate (including the use of the revenues and rate changes over time) and trade. We show that a well-designed carbon tax can capture about 80% of U.S. emissions by taxing fewer than 3,000 taxpayers and up to almost 90% with a modest additional cost. We recommend full or partial delegation of rate setting authority to an agency to ensure that rates reflect new information about the costs of carbon emmissions and of abatement. Adjustments should be made to the income tax to ensure that a carbon tax is revenue neutral and distributionally neutral. Finally, we propose an origin-based system for trades with countries that have an adequate carbon tax. We suggest a system that imposes presumptive border tax adjustments with the ability of an individual firm to prove that a different rate should apply. The presumptive tax could be based either on average emissions for production of the item by the exporting country or by the importing country.

/pdf/the-design-of-a-carbon-tax-5dbhbnefta.pdf

The Design of a Carbon Tax

Many developed countries in Annex B of the Kyoto Protocol have been able to report decreasing emissions, and some have officially fulfilled their CO2 reduction commitments. This is in part because current reporting and regulatory regimes allow these countries to displace emissions intensive production offshore. Using a new highly detailed account of emissions embodied in international trade we investigate this phenomenon of emissions leakage. We independently confirm previous findings that adjusting for trade, developed countries emissions have increased, not decreased. We find that the sectors successfully holding or lowering their domestic emissions are often the same as those increasing their imports of embodied CO2. We also find that the fastest growing flow paths of embodied CO2 largely originate outside the Kyoto Annex B signatory nations. Finally, we find that historically the same phenomenon of emissions displacement has already occurred for air pollution, with the result that despite aggressive legislation in major emitters total global air pollution emissions have increased. If regulatory policies do not account for embodied imports, global emissions are likely to rise even if developed countries emitters enforce strong national emissions targets.

International trade undermines national emission reduction targets: New evidence from air pollution

Comparing policies to combat emissions leakage: Border carbon adjustments versus rebates☆

CO2 emission allowances help to internalise effects of fossil fuel consumption on global climate and sea levels. However, consumption, production and investment decisions do not reach the optimal allocation when the scheme is only implemented in some countries. Production with inefficient facilities in non-participating countries may even increase. Border tax adjustment (BTA) for costs incurred from procuring CO2 emission allowances reduces the leakage. We show that BTA can be both feasible and compatible with World Trade Organization (WTO) constraints. Practicable implementability requires a focus on CO2 emissions from certain processed materials and a separate treatment of electric energy input.

/pdf/border-tax-adjustment-a-feasible-way-to-support-stringent-4lyrullrie.pdf

Border tax adjustment: a feasible way to support stringent emission trading

Zur stringenteren Gestaltung der „Besonderen Ausgleichsregelung“ (BesAR) und des „Eigenstromprivilegs“ haben FÖS, DIW, Arepo Consult und FAU Erlangen-Nürnberg einen gemeinsamen Vorschlag erarbeitet, der im Folgenden kurz zusammengefasst wird. Mit Umsetzung dieses Vorschlags würden die heutigen Industrieprivilegien im Rahmen des EEG (ca. 5,6 Mrd. Euro im Jahr 2013) in etwa halbiert, wodurch die EEGUmlage um rund 20 Prozent (etwa 1 Ct/kWh) gesenkt werden könnte.

https://www.econstor.eu/bitstream/10419/88446/1/774044160.pdf

Vorschlag für die zukünftige Ausgestaltung der Ausnahmen für die Industrie bei der EEG-Umlage

This research paper seeks to contribute to the latest discussions on the financial reporting for emissions trading schemes. It starts out by giving an overview of the International Financial Reporting Standards (IFRS) accounting policies, which are currently applied by the majority of participants in the EU Emissions Trading Scheme. It then argues that in order to fulfil the aims of financial reporting under IFRS, namely to provide a true and fair view, accounting must depict CO2 as a cost of production. Therefore, a fair value approach, both with respect to the initial recognition of allocated allowances and the subsequent measurement of allowances, is generally advocated. The paper finishes by highlighting the insufficiencies of the current IFRS accounting rules, which should be addressed in the upcoming new IFRS on emission trading schemes.

/pdf/emissions-trading-schemes-under-ifrs-towards-a-true-and-fair-4xwmw0973r.pdf

Emissions Trading Schemes under IFRS - Towards a "true and fair view"

The Climate Friendly Materials Platform analyses the transformation of basic material production and use to achieve carbon neutrality by 2050. Our collective aim is to aid progress toward nationally-led industrial decarbonisation policy frameworks compatible with long-term EU strategy, and for the EU to capture the potential of a just and inclusive transformation of the basic materials sector to net climate neutrality by 2050. We achieve this through a process of shared learning and creative exchange with key stakeholders. We bring together leading think tanks and university research groups in Belgium, France, Germany, Hungary, the Netherlands, Poland, Spain, Sweden and Italy to enhance Europe’s analytic understanding of how individual instruments can be brought together into a coherent policy package.

Addressing export concerns in the CBAM File

https://www.econstor.eu/bitstream/10419/227516/1/1735471569.pdf

Optionen zur Auszahlung einer Pro-Kopf-Klimaprämie für einen sozialverträglichen CO2-Preis. Endbericht: Forschungsprojekt im Auftrag des Bundesministeriums der Finanzen (fe 3/19)

Roland Ismer

Papers

Border tax adjustment: a feasible way to support stringent emission trading

Vorschlag für die zukünftige Ausgestaltung der Ausnahmen für die Industrie bei der EEG-Umlage

Emissions Trading Schemes under IFRS - Towards a "true and fair view"

Addressing export concerns in the CBAM File

Optionen zur Auszahlung einer Pro-Kopf-Klimaprämie für einen sozialverträglichen CO2-Preis. Endbericht: Forschungsprojekt im Auftrag des Bundesministeriums der Finanzen (fe 3/19)