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The Role of Trade and Competitiveness Measures in US Climate Policy
Abstract
We review the proposed measures for addressing competitiveness and carbon leakage concerns in recent US climate policy legislation. For eligible energy-intensive, trade-exposed sectors, output-based rebates would initially dampen cost increases; later, border adjustments would ensure that imports face comparable cost burdens. Both measures can in theory enhance the economic efficiency of carbon reduction efforts, but both pose some interesting economic and practical trade-offs. This paper discusses our recent research into the welfare and carbon leakage effects of using output-based allocation and trade measures in conjunction with climate policies.
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The major downside of output-based free allocation is that it severely weakens incentives for efficient domestic production.
“The major downside of this approach is that it severely weakens incentives for efficient domestic production.”
From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [85]
Without carbon costs reflected in material prices, output-based allocation negates any economic incentive for efficient material use and thus raises the overall cost for any given goal.
“As illustrated in Figure 6 , although producers have incentives to make incremental carbon efficiency improvements to meet the benchmark, without carbon costs reflected in material prices, output-based allocation negates any economic incentive for efficient material use (85) and thus raises the overall cost for any given goal.”
From Carbon Leakage, Consumption, and Trade (2022) · cites this paper as [85]
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References 5 · Cited by 44
Metadata
- Authors
- Fischer, C., & Fox, A. K.
- Affiliations
- Resources For The Future (US)
- United States International Trade Commission (US)
- ORCID
- Fischer, Carolyn
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2011-05-01
- Volume
- 101
- Issue
- 3
- Pages
- 258-262
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2057303285
- Cited by
- 44
- References
- 5
- Citations by year
- 2025: 2 · 2024: 1 · 2023: 2 · 2022: 6 · 2021: 5 · 2020: 2 · 2019: 4 · 2018: 1 · 2017: 3 · 2016: 3 · 2015: 3 · 2014: 4 · 2013: 3 · 2012: 5
- FWCI
- 9.74
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review (publishedVersion)
- VU Research Portal (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Data Archiving and Networked Services (DANS) (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Energy, Environment, and Transportation Policies
- Keywords
- United States climate policy, carbon leakage, competitiveness, border adjustment, carbon pricing, welfare effects, trade policy
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