Abstract
In the absence of a global agreement to reduce emissions, Australia adopted a carbon tax unilaterally to curb its own emissions. During the debate prior to passing the carbon tax legislation in 2011, there were concerns about the challenge that Australia’s emissions-intensive and trade-exposed (EITE) industries may face in terms of decreasing international competitiveness due to the unilateral nature of the tax and hence the potential for carbon leakage. In order to address these concerns, this paper explores possible border adjustment measures (BAMs) to complement the domestic carbon regulation in Australia using the multi-sector computable general equilibrium approach. We consider four border adjustments: border adjustments on imports based on domestic emissions; border adjustments on exports via a rebate for exports; a domestic production rebate; and full border adjustment on both exports and imports. We compare the numerical simulation results of these scenarios with a no border adjustments scenario from the standpoint of welfare, international competitiveness and carbon leakage. The key finding is that BAMs have a very small impact on the overall economy and on EITE sectors. In other words, the different BAMs have minimal impact on the outcomes of carbon pricing policy. This finding is consistent with studies for EU, USA, Canada and other countries. Hence, we conclude that the border adjustments are ineffective instruments to safeguard EITE industries in Australia.
Highlights
In the absence of a global agreement to reduce emissions, Australia adopted a carbon tax unilaterally to curb its own emissions and to counter climate change
The analysis proved that information on direct emissions is sufficient to establishing effective border adjustment policies in Japan and indirect emissions need not be included
Our projections show that the reduction in export volume is lowered by using border adjustment (BAE) and BAP to some degree, but again, it is interesting to note that the adoption of green tariffs in Australia is likely to further deteriorate exports as shown by a 5.07% reduction in the export volume compared to the No border adjustment (NBA) outcome (− 4.98%)
Summary
In the absence of a global agreement to reduce emissions, Australia adopted a carbon tax unilaterally to curb its own emissions and to counter climate change. Fischer and Fox (2009) compared the effects of four BAMs (a border tax on imports, a border rebate for exports, full border adjustment and a domestic production rebate) in a setting of a unilateral emissions pricing scheme for the USA and Canada They illustrated the results for different energy-intensive sectors in the two economies and found that such policies have varying, but rather small, impacts. Takeda et al (2012) isolated the effects of BAMs accompanying a carbon tax policy in Japan using a multi-regional CGE model developed using the GTAP-E database They analyzed welfare decline, competitiveness loss and carbon leakage and concluded that ‘no single policy is superior to the other policies’ in terms of addressing simultaneously all three issues. The present study extends the Clarke and Waschik (2012) study by directly simulating and analyzing the effectiveness of a range of BAMs following the introduction of a carbon tax in Australia
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
