American Economic Review: Vol. 104 No. 5 (May 2014)


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Selected International Aspects of Carbon Taxation

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McLure, Charles EJr. 2014. "Selected International Aspects of Carbon Taxation." American Economic Review, 104(5): 552-56.

DOI: 10.1257/aer.104.5.552


Disparate commitments to reduce GHG emissions create demands for border carbon adjustments (BCAs) to prevent negative competitive effects and carbon leakage. BCAs that accomplish economic objectives and are administratively feasible, WTO-legal, and politically acceptable may be impossible. BCAs should be limited to a few basic energy-intensive and trade-exposed products and should be based on the lower of the carbon content of production in the importing country and actual carbon content, or perhaps "best available technology." Whether the World Trade Organization (WTO) would condone BCAs is unclear. BCAs violating basic trade rules might qualify for a special exception.

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McLure, Charles E. Jr. (Hoover Institution, Stanford U)

JEL Classifications

H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H43: Project Evaluation; Social Discount Rate
H87: International Fiscal Issues; International Public Goods
Q54: Climate; Natural Disasters; Global Warming
Q58: Environmental Economics: Government Policy

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