“Trade and Carbon Taxes” by Sam Kortum
Authors:
Sam Kortum
University of ChicagoDavid Weisbach
University of ChicagoJoshua Elliott
University of ChicagoIan Foster
University of ChicagoTodd Munson
University of ChicagoFernando P´erez
University of Chicago
We present an application of CIM-EARTH, a newly developed CGE framework, to the question of carbon leakage. We focus specifically on impacts to US trade, exploring several international coalition scenarios and basic CO2 price trajectories. We begin to explore carbon leakage mitigation strategies such as border adjustments in carbon policy regions, production subsidies to hard hit industries, and limited adoption of a well reduced (relative to the policy coalition standard) carbon pricing scheme in non-coalition regions. We find relatively small losses due to carbon leakage: under a pricing scenario consistent with the recently stated US target of 17% reduction from 2005 emissions levels by 2020, we estimate roughly xx% additional offsetting emissions due to the effect of leakage, consistent with the findings of several recent studies [?, ?]. These results are interpreted as quite preliminary, and an ambitious near-term research agenda is briefly laid out to improve model fidelity – primarily in representations of trade and transport, carbon policy mechanisms, and model-agent expectations and foresight – and scenario coverage, treat sources of uncertainty, and address some related issues of optimal policy selection.
