Chapter 10 Addressing Carbon Leakage by Border Adjustment Measures

Climate Change - Research and Technology for Adaptation and Mitigation所収
Chapter: September 2011

There have been a lot of debates around the concerns of international competitiveness and carbon leakage which are related to the asymmetric implementation of climate policies in the Annex I and non-Annex I countries as a result of the Kyoto Protocol. Border adjustment measures (BAM), in particular border tax adjustment (BTA), are proposed to restore international competitiveness through internalising the carbon cost globally, combat carbon leakage, enable wider and deeper emission cuts domestically and incentivise other countries to join international efforts to cut emissions. By literature review we found that there is disagreement among researchers on both the quantitative importance of leakage and the effectiveness of BAMs proposed to limit leakage and competitiveness impacts.
This chapter aims at assessing the economic and environmental effectiveness of selected BAMs, in particular import tariffs. We focus on a carbon tax system in Japan, which will be introduced in 2011, together with simulated import tariffs levied on all imports of Japan from other economies. We apply a recursive dynamic global computable general equilibrium (CGE) model. Not just adding one more similar economic analysis to current CGE literature on border adjustment, we take account of carbon emissions embodied in tradable goods and the nationally appropriate mitigation actions (NAMAs). The implementation of NAMAs in selected developing countries, in particular China and India, could shorten the gap in the production costs of carbon-intensive industries between countries which implement carbon pricing policies and developing countries. The WTO compatibility of different BAMs is also discussed.