How to design a border adjustment for the European Union Emissions Trading System?

Border adjustments are currently discussed to limit the possible adverse impact of climate policies on competitiveness and carbon leakage. We discuss the main choices that will have to be made if the European Union implements such a system alongside the EU ETS. Although more analysis is required on some issues, on others some design options seem clearly preferable to others. First, the import adjustment should be a requirement to surrender allowances rather than a tax. Second, the general rule to determine the amount of allowances per ton imported should be the product-specific benchmarks that the European Commission is currently elaborating for a different purpose (i.e. to determine the amount of free allowances). Third, this obligation should apply when the imported product is registered at the EU border, and not after the end of the year as is the case for domestic emitters. Fourth, the export adjustment should take the form of a rebate on the amount of allowances a domestic emitter has to surrender. Five, this rebate should equal the above-mentioned product-specific benchmarks, not the emissions of the particular exporting plant or firm. Finally, the adjustment does not have to apply to consumer products but mostly to basic products.     

Border adjustment for European emissions trading: Competitiveness and carbon leakage

Unilateral or sub-global policies to combat climate change are potentially sensitive to free-riding and carbon leakage. One way of dealing with carbon leakage and competitiveness is the imposition of border adjustment measures for competing imports, for example in the form of the obligation to importers of goods to purchase and surrender emissions allowances to the authorities when importing. In this paper, we explore some implications of border adjustment measures in the EU ETS, for sectors that might be subject to carbon leakage. We examine the implications of two variants of these measures on the competitiveness of these sectors and on the global environment with the help of a multi-sector, multi-region computable general equilibrium (CGE) model of the global economy. Our calculations suggest that border adjustment might reduce the sectoral rate of leakage of the iron and steel industry rather forcefully, but that the reduction would be less for the mineral products sector, including cement. The reduction of the overall or macro rate of leakage would be modest. So, from an environmental point of view border tax adjustments would not be a very effective policy measure, but might mainly be justified by considerations of sectoral competitiveness.     

Climate change policy and international trade: Policy considerations in the US

Significant recent attention, in both research and policy realms, has been given to the intersection of international trade and global climate change. Trade presents challenges to climate policy through carbon leakage and competitiveness concerns, but also potential solutions through the use of cooperative trade agreements, technology transfer, or carbon tariffs against recalcitrant nations. This study examines how trade may affect climate policy in the US and specifically examines the use of carbon tariffs as suggested by recent bills before the US Congress. We argue that even if such actions are legal at the World Trade Organization, they are probably not necessary to protect industrial competitiveness in the traditional sense, could cover only a small proportion of total embodied emissions in trade, and may in fact be counterproductive at a moment when global cooperation is desperately needed. While political agreement may necessitate at least the threat of carbon tariffs, cooperative agreements such as global sectoral agreements, technology sharing, etc. could be more productive in the short term.     

Addressing competitiveness and leakage concerns in climate policy: An analysis of border adjustment measures in the US and the EU

The implementation of climate policies in the US and EU in light of uncertainties about future international climate policy has shifted attention to two interrelated concerns, namely competitiveness and carbon leakage. Although various policy measures are available to address these concerns, there has been much discussion about one such measure in particular: the use of offsetting measures at the border. This article compares policy discussions in the US and the EU on how to address competitiveness and carbon leakage concerns, with a focus on the role of import-related border adjustment measures. It analyses the kinds of measures that so far have been put forward with a view to addressing competitiveness and carbon leakage; compares the approaches to the problems in the US and the EU; and provides a preliminary discussion of international cooperation on border adjustment measures. It concludes that two kinds of cooperation are needed between the EU and the US – not only cooperation through formal international negotiations, but also cooperation through international learning processes, in which the EU and the US learn from each other about design and implementation issues as they develop their respective cap-and-trade systems.     

Impacts of carbon motivated border tax adjustments on competitiveness across regions in China

China is a large developing country with high carbon intensity. It is likely that China will have to face the challenge of CBTA (carbon motivated border tax adjustments) in future. Meanwhile, CBTA would create price gap between CBTA users and target countries, and change the competitiveness of different producers. Under such circumstances, this paper seeks to contribute to the debate on CBTA by focusing on the potential impacts of CBTA on different regions of China from a perspective of competitiveness. We adopt two geographical divides in China (eastern-central-western zones, high-trade-openness to low-trade-openness regions), and simulate the potential impacts across regions through a general equilibrium model. Our simulation results show that CBTA would affect competitiveness of different producers, their comparative advantages, relative trade shares, outputs and emissions. CBTA would induce structure change of the economy, and result in a shift of industrial output toward non-industrial output. There are significant differences in the effects of CBTA among different regions in China. CBTA would result in a relocation of outputs across regions in China. Therefore, CBTA would also have impact on China’s regional development policy.     

Border carbon adjustments: Addressing emissions embodied in trade

Approximately one fourth of global emissions are embodied in international trade and a significant portion flows from non-carbon-priced to carbon-priced economies. Border carbon adjustments (BCAs) figure prominently as instruments to address concerns arising from unilateral climate policy. Estimating the volume of emissions that could be potentially taxed under a BCA scheme has received little attention until now. This paper examines how a number of issues involved in the implementation of BCAs can affect their ability to cover emissions embodied in trade and thus address carbon leakage. These issues range from ensuring compliance with trade provisions and assumptions on the carbon intensity of imports, to determining which countries are included and whether intermediate and final demand are considered. Here we show that the volume of CO₂ captured by a scheme that involved all Annex B countries could be significantly reduced due to these issues, particularly by trade provisions, such as the principle of ‘best available technology’ (BAT). As a consequence, the tariff burdens faced by non-Annex B parties could dwindle considerably. These findings have important policy implications, as they question the effectiveness and practicalities of BCAs to reduce carbon leakage and alleviate competitiveness concerns, adding further arguments against their implementation.     

欧盟航空碳税的影响与对策

本文针对欧盟强行开征的航空碳税问题进行了实质揭示和影响分析,对欧盟航空碳税进行了探析,提出了应对欧盟航空碳税的方法与措施。     

Carbon emission offsets for aviation-generated emissions due to international travel to and from New Zealand

International air transport emissions are not subject to liability under the Kyoto Protocol. However, pressure is mounting globally for international aviation to be included in post-Kyoto arrangements. In the absence of international collective action, a number of so-called carbon offsetting schemes have emerged that allow individual travellers and companies to compensate for their international air travel emissions. These schemes offer technological solutions, such as planting sink forests to sequester emissions. To consider the implications of future collective action, this paper presents a case study assessment of the physical feasibility of five schemes for all short duration journeys to and from New Zealand. This is the first comprehensive national-level case study assessment of competing offsetting options for international aviation emissions in the peer-reviewed literature. The CO₂-e emissions produced by the air travel of international visitors to New Zealand, and for New Zealand residents travelling overseas, is calculated in this paper to be 7893 and 3948 Gg, respectively, in 2005. It is then shown that no single offsetting scheme targeted inside the country appears physically and/or politically realistic. This indicates the sheer size of these emissions, and the challenge that the international community faces for collective action on this matter.     

Global warming agreements,international trade and energy/carbon embodiments: an input–output approach to the Italian case

In the Kyoto Protocol the absence of Green House Gases (GHGs) commitments of developing countries (non-Annex I) and the more flexible terms of implementation which are allowed to countries shifting toward a market economy (transition economies) naturally lead to the absence or to less constraining national measures and policies of reduction of the GHGs emissions which, in turn, may determine a comparative advantage in the production of the highest energy/carbon intensive commodities for these countries. These arguments are valid also considering the future implementation of the European Emission Allowance Trading Scheme (EATS). Thus, developing countries may become a haven for the production of not environmental-friendly commodities; in this case, the so-called Pollution Haven Hypothesis, stating that due to freer international trade the comparative advantage may change the economic structure and consequently the trade patterns of the countries linked by trade relationships, could occur. This would lead to the increase of the transfers of energy and carbon embodied in traded commodities from developing countries and transition economies toward Kyoto or EATS constrained countries.     

Carbon capture and utilization technologies: a literature review and recent advances

This paper presents a comprehensive list of Carbon Capture and Utilization technologies and applications, ranging from lab-scale R&D activities reported in academic papers to commercially established uses of carbon dioxide. Carbon dioxide, as a source of carbon, has the potential to be used as a solvent, as a raw material in the manufacturing of fuels, carbonates, polymers, and chemicals, or as a recovery agent in techniques such as enhanced oil recovery or enhanced coal bed methane. In this paper, a literature review and recent advances of each technology are explained. To finish, most relevant Life Cycle Assessment studies carried out by experts in this field are included. Among the different alternatives studied for the use of carbon dioxide, the processes of carboxylation, consisting the synthesis of carbonates and carboxylates, have stood out. Both the production of salicylic acid as well as that of dimethyl carbonate and mineral carbonation are presented as the most likely applications of carbon dioxide, at least, in the short term.