قیمت گذاری انتشار آلاینده بهینه در حضور اثر سرریز بین المللی: تجزیه نشت و انگیزه های قوانین و مقررات تجارت

Carbon leakage provides an efficiency argument for differentiated emission prices in favor of emission-intensive and trade-exposed sectors under unilateral climate policy. However, differential emission pricing can be used as a beggar-thy-neighbor policy to exploit terms of trade. Adopting an optimal tax framework, we propose a method to decompose the leakage and terms-of-trade motives for emission price differentiation. We employ our method for the quantitative impact assessment of unilateral climate policy based on empirical data. We find that the leakage motive yields only small efficiency gains compared to uniform emission pricing. Likewise, the terms-of-trade motive has rather limited potential for strategic burden shifting. We conclude that in many cases the simple first-best rule of uniform emission pricing remains a practical guideline for unilateral climate policy design.

Non-differential pricing of uniformly dispersed pollutants across all sources constitutes a first-best strategy to meet an emission reduction target implemented via harmonized emission taxes or likewise a system of tradable emission quotas. The marginal cost of emitting a given pollutant should be the same so that the economy as a whole will employ the cheapest abatement options. However, incomplete regulatory coverage of emission sources provides an efficiency rationale for emission price differentiation across sectors. When unilateral emission regulation aims at combating international externalities, such as global warming, global cost-effectiveness of unilateral action can be hampered through the relocation of emissions to countries without emission regulation—so-called emission leakage (Hoel, 1991 and Felder and Rutherford, 1993). There are two major intertwined channels for leakage. The fossil-fuel-price channel refers to increased energy consumption in non-regulated countries as reduced energy demand of emission-constrained countries depresses international fuel prices. The competitiveness channel refers to shifts in comparative advantage for emission-intensive and trade-exposed (EITE) industries. EITE sectors in regulated countries are put at a cost disadvantage vis-à-vis competitors abroad—domestic EITE production declines along with decreasing exports and increased imports from non-regulated countries. In order to reduce leakage and improve global cost-effectiveness, unilateral emission regulation should complement uniform emission pricing with tariffs on traded goods—as a tax or subsidy on net imports or net exports (Markusen, 1975 and Hoel, 1991). In the climate policy debate, this theoretical finding is reflected in proposals for border carbon adjustments where emissions embodied in imports from non-regulated countries are taxed at the emission price of the regulating country and emission payments for exports to non-regulated countries are rebated. The applied economic literature (see Böhringer et al., 2012 for a comprehensive model comparison study) finds that while border carbon adjustment can effectively reduce leakage and ameliorate excessively adverse impacts for EITE industries in regulated countries, the scope for global cost savings is small. The reasoning behind this is that import tariffs levied at the industry-average of embodied carbon do not provide direct abatement incentives for foreign producers. If border adjustments are not available, perhaps due to legal, administrative or political barriers, Hoel (1991) shows that differential emission pricing across domestic sectors constitutes a second-best strategy to cope with international spillover effects. As a matter of fact, emission taxation schemes in many OECD countries involve a differentiation of tax rates among sectors where tax rates are typically differentiated in favor of EITE industries, including complete tax exemptions (OECD, 2007). While differential emission pricing may be justified as a second-best strategy to reduce leakage and improve global cost-effectiveness of unilateral climate policy, the fundamental problem is that price differentiation can be strategically used to exploit terms of trade. Open economies may be tempted to differentiate emission prices as a substitute for optimal tariffs shifting the domestic emission abatement burden as much as possible to unregulated trading partners. The terms-of-trade motive induces countries to increase domestic emission taxes on “dirty” commodities which are exported and lower taxes on “dirty” commodities which are imported (Krutilla, 1991 and Anderson, 1992). The challenge for an informed policy debate on emission price differentiation is that the leakage and terms-of-trade motives are inherently intertwined. It is not obvious to what extent emission price differentiation can be justified on global efficiency grounds to combat leakage or should be disguised as selfish strategy to manipulate terms of trade. Likewise, a domestic regulator may want to sort out the pure leakage motive for differential emission pricing in negotiations with representatives of influential EITE industries that lobby for preferential treatment at the expense of other sectors in the domestic economy. In this paper we present an analytical optimal tax framework that decomposes the leakage and terms-of-trade motives for differential emission pricing. We then incorporate the decomposition method in a computable general equilibrium model to investigate the relative importance of the leakage and the terms-of-trade motives for the direction and magnitude of emission price differentiation based on empirical data. Furthermore, the numerical analysis permits us to assess the magnitude of global cost savings as well as the scope of shifting the burden through differential emission pricing compared to uniform emission pricing. We find that while leakage concerns may justify distinct emission price discrimination in favor of EITE industries, the infra-marginal global cost savings are very small. Emission price differentiation (including exemptions) is a very indirect and thus weak instrument to reach out to foreign emissions. At the same time, the efficiency gains from leakage reduction trade off with higher direct abatement cost due to diverging marginal abatement cost across domestic emission sources. Our quantitative results also show that the potential for exploiting terms of trade through differential emission pricing is very limited when unilateral action must comply with a global emission reduction target, i.e., the need for cuts in global fossil fuel demand. The distributional impacts of unilateral action through terms-of-trade effects are then predominantly driven by changes in international fossil fuel prices which are robust to alternative unilateral emission pricing strategies. We conclude that uniform emission pricing remains a practical guideline for unilateral climate policy design. The remainder of this paper is organized as follows. Section 2 presents the basic theoretical framework underlying our decomposition of the leakage and the terms-of-trade motives for emission price differentiation. Section 3 entails a non-technical overview of the computable general equilibrium model and discusses our numerical findings. Section 4 concludes.

As long as the world community fails to achieve a broad-based international agreement with binding multilateral emission reduction targets, greenhouse gas emission reduction hinges on unilateral action by industrialized countries acknowledging historical responsibility and ability-to-pay. Cost-effectiveness of unilateral climate policy may, however, be seriously hampered through emission leakage to unregulated regions. Concerns on global environmental integrity of unilateral emission control in theory provide an argument for preferential treatment of emission-intensive and trade-exposed sectors. At the same time, the leakage motive for differential emission pricing cannot be easily distinguished from potential interests of the abating region to exploit international market power through strategic terms-of-trade manipulation. In a political economy perspective the leakage argument may also be employed by domestic lobby groups with the objective to dilute structural change towards less emission-intensive production. This paper has provided a theoretical framework to decompose the leakage motive from the terms-of-trade motive for differential emission pricing in open economies. Implementation of the decomposition method in an applied general equilibrium model has permitted us to investigate the relative importance of these motives for the direction and magnitude of emission price differentiation as well as for the induced inframarginal economic adjustment cost. The main insight from our quantitative analysis of unilateral climate policies in the EU or the US is that the scope for global efficiency gains and burden shifting through emission price differentiation is limited. International feedback effects to unilateral policies are to a large extent driven by international fossil fuel market responses that remain robust to alternative domestic emission pricing strategies. Differential emission pricing between emission-intensive and trade-exposed industries and other segments of the domestic economy is furthermore a blunt instrument to reach out to foreign emissions and thereby increase global cost-effectiveness of unilateral action. We therefore conclude that the simple first-best rule of uniform emission pricing rather than any complex second-best arguments which may run the risk of detrimental trade conflicts is well advised in the context of unilateral climate policy.