Carbon Tariffs Research Articles

Трансграничное углеродное регулирование: взгляд из Китая

On March 15, 2022 the Carbon Border Adjustment Mechanism (CBAM, also known as the EU Carbon Tariff) was preliminarily approved by the EU Council. It was planned to be formally implemented since January 1, 2023, with a three-year transition period. This means that EU member states support the implementation of carbon tariff policies. As the world’s first proposal to address climate change in the form of a carbon tariff, the carbon border adjustment mechanism will have a profound impact on global trade. Our study aims to analyze the implications and further development of CBAM. The carbon tax leads to the promotion of an accelerated and healthy carbon market, stimulating the growth of demand for green electricity, and rooting the authentication of low and zero carbon products. However, the practical implementation of the introduction of the tax still faces many obstacles. CBAM widens the gap between developed and developing countries in terms of GDP and wealth. This could exacerbate income and wealth disparities between rich and poor economies and further undermine the ability of some low-income countries to decarbonize their economies. To ensure a fair transition to a low-carbon economy and prevent excessive negative impacts on developing countries during the transition period, the IMF must play a key role in identifying and addressing the cross-border spillovers of climate policy, especially those that affect the balance of payments and growth trajectories of vulnerable countries. As an option to address this side impact, we briefly discussed the possibility of creating an Equitable Decarbonization Fund with CBAM funds to support decarbonization projects in low-income countries and the development of green technologies.

Analysis of the legitimacy of carbon tariffs—from the perspective of Habermas's legitimacy theory

Analysis of the legitimacy of carbon tariffs—from the perspective of Habermas's legitimacy theory

The Effect of Carbon Tariffs on UK Food Trade and Its Carbon Emissions: A Gravity Model with Micro-Simulation

The Effect of Carbon Tariffs on UK Food Trade and Its Carbon Emissions: A Gravity Model with Micro-Simulation

A Study on the Optimal Carbon Tax and Effects under the Background of Carbon Tariffs: A Theoretical Analysis Based on Oligopoly Competition Model

A Study on the Optimal Carbon Tax and Effects under the Background of Carbon Tariffs: A Theoretical Analysis Based on Oligopoly Competition Model

Will the imposition of carbon tariffs enhance or worsen the carbon performance of China's export industries? A reality check based on 28 manufacturing industry segments.

Carbon tariffs are directly linked to carbon performance and have an impact on export sectors. This paper examines the relationship between carbon tariffs and carbon performance based on China's manufacturing sector, helping to visually quantify the impact of carbon tariffs and to adopt more favourable strategies to address the impact. This paper uses data from 28 manufacturing industry segments in China from 2009 to 2019, estimating carbon performance using an SBM model incorporating non-desired outputs. The panel Tobit model is also used to explore the driving role of carbon tariffs and related variables on carbon performance. The results show the following: First of all, China's manufacturing carbon performance is generally on an upward trend but is mainly driven by improvements in the light textile and machinery manufacturing industries. Secondly, in terms of drivers of carbon performance, the imposition of carbon tariffs will increase the carbon performance of China's manufacturing sector. Furthermore, R&D investment is positively correlated with carbon emission performance. The significant positive impact of export dependence is manifested in the light and textile industry. Energy intensity has a significant positive impact on the textile industry and a significant negative impact on the resource processing industry. Environmental regulations have a negative impact on the light textile industry. China should optimize the industrial chain of resource processing industry. At the same time, China should increase R&D investment in emission reduction and product upgrades, encourage the export of light and textile industrial products, increase the import of resource processing industrial products. Also, the government should formulate environmental regulatory policies that are close to the nature of the industry.

Research on International Mutual Recognition of Carbon Certification System of Automobile Products

With the global attention to climate change gradually heating up, to carbon peak carbon neutralization as the theme of the new international trade system is gradually taking shape, will also have a broad and far-reaching impact on our foreign trade pattern. The automobile industry is the key to transportation in our country carbon industry, in response to climate change under the situation of double carbon targets, for car carbon product certification international mutual recognition research is not only beneficial to China's auto industry to establish a comprehensive carbon accounting system but can also help our country automobile industry breakthrough carbon tariff barriers to trade actively, Promote Chinese automobile manufacturing industry to complete green and low-carbon transformation.

Research Progress of the International Carbon Tariff: A Review

Under the constraints of the target peak carbon dioxide emissions and carbon neutrality, how the international carbon tariff can be levied have become an important question for scholars and research institutions all over the world. This paper aimed to comprehensively sort the relevant literature on the Carbon Border Adjustment Mechanism from an economic perspective. Based on defining the concept connotation and extension of carbon tariff, we summarized and determined the price mechanism, institutional mechanism, and coordination mechanism of the carbon tariff, and analyzed the impact of carbon tariff on the economic environment and other fields. Further, this paper makes an international comparison of the existing reasonably operable carbon tariff, points out the focus and direction of the next research, and strives to provide valuable experience and theoretical reference for the innovative practice of building the international Carbon Border Adjustment Mechanism.
 Keywords: carbon tariff, border tax adjustment, connotation and extension, mechanism design, economic impact

The impacts of carbon tariffs on international trade flows and carbon emissions: An analysis integrating trade elasticities with an application to US-China trade

Carbon tariffs have been widely studied as a prominent climate policy in terms of their influences on the economy and the environment. However, previous studies of their effectiveness did not incorporate into the analysis of some key factors, including, notably, trade elasticities. This paper aims at reducing the gap between trade economics and environment studies by integrating trade elasticities into the analysis of carbon tariffs' impacts on trade flows and carbon emissions embodied in exports. We start by adopting the gravity trade model and constructing a panel data set of 63 countries from 2005 to 2015 to calculate the trade elasticities across 13 industries. With a simple model that translates carbon tariffs into tariffs, we evaluate the cross-country and cross-industry impacts of carbon tariffs. A model to forecast the effect of carbon tariffs on China-US trade under different scenarios is also provided. We discover that industries' trade elasticities and carbon intensities play an essential role in determining carbon tariffs' impacts. Furthermore, our estimations show the threshold carbon tariffs for the 13 industries with an average of $42/tCO2. We found out that if the U.S. stopped importing from China by replacing all Chinese exports with its domestic productions, it would emit 88.8% fewer carbon emissions than China does, which would contribute to a 0.65% decrease in world carbon emissions. Other scenarios of replacing all Chinese exports with Canadian, Japanese, or Mexican exports show similar results. This paper illuminates the critical importance of incorporating trade elasticities when designing carbon tariffs.

Comparative analysis of carbon border tax adjustment and domestic carbon tax under general equilibrium model: Focusing on the Indonesian economy

The carbon border tax adjustment policy is applied to mitigate the carbon leakage issue resulting from unequal carbon tax implementation and encourage associated nations' participation in domestic carbon reduction efforts. The high share of primary energy exports and the carbon emissions generates mean that a global carbon control policy will significantly affect participating countries. This study examines the effects of carbon border tax adjustment policy on developing countries, and evaluates the substitutability between domestic and inter-regional carbon control policies as a development of existing research investigation. The Global Trade Analysis Project energy-environmental version (GTAP-E) model and CGEBox, a global computable general equilibrium user interface tool, were utilized to address the impact of domestic and inter-region carbon policy on the economies, trade levels, and environmental conditions of the participating countries. By reviewing the evidence of the impact analysis, this study investigates the influence of carbon border tariff adjustment implementation on inducing domestic carbon tax participation in non-regulated countries, with Indonesia as a case study. In the scenario we develop, Indonesia imposes various carbon taxes and is subject to border carbon tariff by its trade partners. The analysis reveals that border tax adjustment brings negative trade and economic implications to the affected countries, with a small reduction in global carbon emission. The findings show that Indonesia's low domestic carbon tax levy helps mitigate the adverse economic and trade distortion effects of the carbon border tax adjustment imposed by its trading partners. Additionally, we estimate the level of carbon border tariffs levied on each country that achieves the same employment effects as a carbon tax in the analyzed country. The simulation results indicate that the impact of the carbon border tax imposed is not significant enough to induce carbon control policy implementation in affected countries. Hence, higher carbon border tariffs should be proposed to encourage non-regulated countries to adopt stringent carbon policy measures to maximize global carbon emission abatement.

Making the EU Carbon Border Adjustment Mechanism acceptable and climate friendly for least developed countries

Implementation of CBAM to support EU climate neutrality by 2050 has raised several concerns. As the mechanism aims to minimise leakage through equal fairness in global mitigation, imposing carbon tariffs on the EU’s imports of energy-intensive goods could curtail the export of EU trading partners. This might be detrimental, especially to the LDCs, due to their high exposures and vulnerability risks. This paper assesses and quantifies the implication of EU-CBAM and analyses eight complementary measures to mitigate the impacts on LDCs. Scenario developments are constructed by projecting the EU’s new climate targets relative to the reference scenario of the EU’s current policies. A more stringent climate target results in carbon leakage, and implementing CBAM will reduce the rate by one-third by 2040. The analysis also confirms significant welfare loss for LDCs through declining exports. Exempting LDCs from EU CBAM is less justifiable, as this measure results in greater leakage than other options. A further assessment confirms that policy recommendation for CBAM complementary measures should focus on the climate transformation pathway for LDCs. EU CBAM implementation with revenue-redistribution targeted to promote clean and efficient use of energy in LDCs has improved the welfare of recipient countries, substantially reduced leakage, and proven cost-efficient for the EU.

North–South asymmetry, unilateral environmental policy and carbon tariffs

AbstractThis paper focuses on the potential impact of a carbon tariff on carbon emissions, North–South trade and welfare. We use a North–South trade model, where North implements a unilateral environmental policy on domestic carbon‐intensive industries followed by a carbon tariff on imports from South. Unlike the existing studies, we allow asymmetry in clean production technologies and marginal environmental damage. We show that a carbon tariff can reduce the global carbon emission via the use of a more advanced clean production technology in North, which increases the firm profit and welfare. However, improvement in welfare of North is associated with a decrease in global trade flows and welfare of South. We find that, in the presence of asymmetry in clean production technologies between North and South, a carbon tariff introduced by the North can eliminate carbon leakage, but the exports of South decrease below the pre‐unilateral environmental policy level and hence North can potentially use a carbon tariff for trade protectionism in the name of reducing carbon leakage in South.

Supply Network Design with Carbon Tariffs and Location-Specific Carbon Policies

Supply Network Design with Carbon Tariffs and Location-Specific Carbon Policies

Supply network design with carbon tariffs and location-specific carbon policies

Supply network design with carbon tariffs and location-specific carbon policies

How Carbon Tariffs and Climate Clubs Can Slow Global Warming

How Carbon Tariffs and Climate Clubs Can Slow Global Warming

The Impacts of Carbon Tariffs on International Trade Flows and Carbon Emissions: An Analysis Integrating Trade Elasticities with an Application to Us-China Trade

The Impacts of Carbon Tariffs on International Trade Flows and Carbon Emissions: An Analysis Integrating Trade Elasticities with an Application to Us-China Trade

Influence of carbon tariffs on China's export trade.

The database of the Global Trade Analysis Project (GTAP) and its energy–environmental model, known as GTAP-E, are used in this study to simulate the effect of the simultaneous and separate carbon tariff impositions of EU, the USA, and Japan on the export and export structure in China. Simulation results show that the carbon tariff impositions of developed countries on China will decrease the export to EU, the USA, and Japan but increase the export of China to other countries associated with the trade diversion in China. The USA and EU impose carbon tariffs on China, which will have a serious impact on China’s export trade, especially for the export trade of energy-intensive industries. When Japan imposes carbon tariff on the exports of China, the positive influence on the export trade is weaker compared to the situation that the USA and EU imposed on China. Furthermore, imposing carbon tariffs on China will improve its trade structure; promote its agriculture, petroleum, and natural gas exploration and electricity industries; reduce its export trade volume of coal mining, petroleum products, and energy-intensive and other industries; decrease the export trade share of energy-intensive industries; and increase the export trade share and services of other industries. In this regard, China should reduce the carbon content of export products initiatively. On the one hand, China can solve this problem by levying carbon tax, developing emerging industries, and strengthening the research and development of low-carbon technologies. On the other hand, China should actively participate in the formulation of international standards of carbon tariff and become a participant in the international emission reduction rules in the field of climate change.

Decarbonization of economy as a factor of influence on the development of coal industry of the world and Russia

Decarbonization of economy, allowing to decrease so called carbon footprint – carbon dioxides emissions due to application energy sources with low carbon content, is one of effective measures to decrease greenhouse gas emissions into atmosphere. Most of countries of the world had ratified the Paris Agreement and confirmed intention to decarbonize economies. It was noted that still in 2020 many countries began to decrease coal consumption and use renewable energy sources for coal substitution for energy generation. Data on the world production of coking coal, export and import of it presented, as well as place of Russia at the world market of coking coal described. Influence of the modern climate “agenda“ in basic countries of the world on the development of coal mining shown. New standards of investment projects financing and their influence on restriction of mining and utilization of coal, considered. Also measures to decrease greenhouse emissions at the production of ferrous metallurgy products, including introduction by EC countries of carbon tariff – European border carbon tax considered. It was highlighted that application of the transborder carbon tax, hydrogen technologies and announced decarbonization can become instruments of effective impact resulting in considerable decrease of market of both energy and coking coals. In the Center of study of coal industry of the world and Russia of the Institute of energy studies two variants of forecasting of world mining of coal elaborated, taking into account existing tendency of transfer to “green” metallurgy and application of hydrogen technologies instead of coke. Due to the first variant a further expanding of steel industry capacities is provided for production of metal with stabilization by 2035 of coking coal mining at the level of 1470 million tons. Beyond the period, the world mining of coking coal most probably will slightly decrease by 2036–2040 down to 1390 million tons. According to the second variant, a decrease of coking coal consumption will take place due to decrease of steel production volumes and due to the transfer to metallurgy decarbonization, implementation of “green” energetics and hydrogen technologies. This variant is characterized by systemic decrease of coking coal mining by 2036–2040 down to 580 million tons.

Comments: Carbon Tariffs - Fair Incentives for Change?

Carbon credits, carbon taxes, and emissions trading systems are familiar terms in discussions about limiting global warming, the Paris Agreement, and net-zero emissions goals. A more recent addition to the glossary of climate policy is “carbon tariff.” While the concept is not new, it recently surfaced in nascent policymaking in the EU. In 2019, European Commission President Ursula von der Leyen proposed a “carbon border adjustment mechanism (CBAM)” as part of a proposed green deal. In March, the European Parliament adopted a resolution on a World Trade Organization (WTO)-compatible CBAM. A carbon tariff, or the EU’s CBAM, is a tax applied to carbon-intensive imports. Countries that have pledged to be more ambitious in reducing emissions—and in some cases have implemented binding targets—may impose carbon costs on their own businesses. Being eyed now are cross-border or overseas businesses that make products in countries in which no costs are imposed for emissions, resulting in cheaper carbon-intensive goods. Those products are exported to the countries aiming for reduced emissions. The concern lies in the risk of locally made goods becoming unfairly disadvantaged against competitors that are not taking similar steps to deal with climate change. A carbon tariff is being considered to level the playing field: local businesses in countries applying a tariff can better compete as climate policies evolve and are adopted around the world. Complying with WTO rules to ensure fair treatment, the CBAM will be imposed only on high-emitting industries that compete directly with local industries paying a carbon price. In the short term, these are likely to be steel, chemicals, fertilizers, and cement. The Parliament’s statement introduced another term to the glossary of climate policy: carbon leakage. “To raise global climate ambition and prevent ‘carbon leakage,’ the EU must place a carbon price on imports from less climate-ambitious countries.” It refers to the situation that may occur if businesses were to transfer production to other countries with laxer emission constraints to avoid costs related to climate policies. This could lead to an increase in total emissions in the higher-emitting countries. “The resolution underlines that the EU’s increased ambition on climate change must not lead to carbon leakage as global climate efforts will not benefit if EU production is just moved to non-EU countries that have less ambitious emissions rules,” the Parliament said. It also emphasized the tariff “must not be misused to further protectionism.” A member of the environment committee, Yannick Jadot, said, “It is a major political and democratic test for the EU, which must stop being naïve and impose the same carbon price on products, whether they are produced in or outside the EU, to ensure the most polluting sectors also take part in fighting climate change and innovate towards zero carbon. This will give us the best chance of remaining below the 1.5°C warming limit, whilst also pushing our trading partners to be equally ambitious in order to enter the EU market.” The Commission is expected to present a legislative proposal on a CBAM in the second quarter of 2021 as part of the European Green Deal.

Close the carbon loophole

Close the carbon loophole

A Political Theory of Legal Exceptions

This Article distills three paradigms through which to view legal exceptions in international trade agreements. Under the Policy Space Paradigm, governments have the right to violate international obligations so long as the violation is necessary to pursue a public policy goal permitted by an exception. Under the Safety Valve Paradigm, exceptions excuse violations that are undeterrable, such as those motivated by overwhelming domestic political pressure. Both of these approaches, which are dominant in international legal practice, permit governments to invoke international legal exceptions only to the extent that the government acts with a single, permissible objective. In so doing, both paradigms rest on faulty assumptions about how domestic policymaking works.I therefore introduce the Channeling Paradigm, which rests on the observation that international trade policies are the result of bargaining between domestic interest groups. Exceptions in trade agreements influence that bargaining process and the resulting domestic coalitions. Industries seeking economic protection will often ally themselves with groups pursuing “non-trade” public policy goals, such as environmental protection or public health. Both groups benefit. The domestic industry obtains protection from foreign competition by lending its political support to a public policy goal. Public policy advocates obtain important political support for policies that provide public goods that governments often undersupply, such as measures to protect public health, fight climate change, and address economic inequality. Counterintuitively, then, the domestic political bargaining that legal exceptions encourage serves the public interest by channeling protectionist pressure into the promotion of public goods. The Channeling Paradigm has implications for dispute resolution under international trade agreements, as well as the drafting of new agreements. In short, existing tests for the application of trade agreements’ public policy exceptions unduly constrain domestic politics. This Article argues that trade tribunals and treaty negotiations should adopt a Predominant Motive test when interpreting and drafting exceptions clauses. Under this approach, a trade restrictive policy would benefit from an exception if the primary objective of the measure is a permitted goal under the exception. So long as it does not become the predominant purpose of the challenged policy, economic protection would not be fatal to invoking an exception. The WTO-compatibility of a wide range of critical government policies that have mixed motives—including President Biden’s Buy American requirements that seek to address economic inequality within the United States; efforts to reshore critical U.S. supply chains with the goal of ensuring the United States has access to the components it needs to be a global leader in manufacturing; the European Union’s efforts to impose a carbon tariff in aid of its efforts to combat climate change; and public health restrictions on trade in medical supplies and the COVID-19 vaccine—all depend on a more flexible approach to international legal exceptions.