27 May 2010

Climate Change and Trade

Taxing carbon at the border?

Daniel Gros / Christian Egenhofer / Noriko Fujiwara / Anton Georgiev / Selen Sarisoy Guerin

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This study analyses the economic and political consequences of introducing a tax on the carbon content of imported goods at EU borders and whether such a tax would be compatible with WTO rules. The major findings are:
1. A CO2 border tax or import tariff would increase global welfare.
2. Such a carbon import tariff can be made to be compatible with WTO rules.
3. There are no insurmountable practical obstacles to introducing such a tariff.
4. The equity concerns of the UNFCCC could be taken into account by rebating the proceeds of the tariff to those countries manifestly unable to shoulder the burden themselves.

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