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  3. American Economic Review
  4. May 2011
  5. The Role of Trade and Competitiveness Measures in US Climate Policy

The Role of Trade and Competitiveness Measures in US Climate Policy

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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.

Citation

Fischer, Carolyn, and Alan K. Fox. 2011. "The Role of Trade and Competitiveness Measures in US Climate Policy." American Economic Review, 101 (3): 258-62. DOI: 10.1257/aer.101.3.258

JEL Classification

  • Q54 Climate; Natural Disasters; Global Warming
  • Q58 Environmental Economics: Government Policy