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GTAP Resource #4172

"Border Adjustments under Unilateral Carbon Pricing: Are they Warranted in the Case of Australian Carbon Tax?"
by Siriwardana, Mahinda, Sam Meng and Judith McNeill


Abstract
In the absence of a global agreement to reduce emissions, Australia has adopted a carbon tax unilaterally to curb its own emissions and to counter climate change. During the debate prior to passing the carbon tax legislation, there were concerns about the challenge that Australia’s emissions intensive and trade exposed (EITE) industries may face having to experience decreasing international competitiveness due to the unilateral nature of the tax and hence the potential for carbon leakage. Domestic climate policies to limit carbon emissions can put extra pressure on industries that use emission-intensive energy sources in their production leading to cost differentials between domestic production and production in countries where carbon emissions are not constrained. It has been argued that such climate policy differences could place Australian industries at a competitive disadvantage in both home and foreign markets The potential adverse impact on Australia’s competitiveness and seemingly inevitable carbon leakage have been used by opponents to the climate policy in order to undermine the carbon pricing strategy in Australia. Some have argued in favour of introducing border adjustments to make a levelled playing field with international competitors in a carbon constrained world.

In order to address these concerns, this paper explores the border adjustment policies to complement the domestic carbon regulation in Australia using the multi-sector, multi-country computable general equilibrium (CGE) modelling approach. In particular we use the GTAP-E model which has a detailed specification of energy substitution possibilities and carbon emissions accounting. The analysis reported in the paper is based on GTAP version 8 data base. We consider four border adjustments: border adjustments on imports (green tariffs) based on domestic emissions; border adjustments on exports via a rebate for exports; domestic production rebate; and full border adjustment on both expor...


Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Version:
Created: Siriwardana, M. (4/15/2013)
Updated: Siriwardana, M. (5/27/2013)
Visits: 732
- Climate change policy
- Trade and the environment
- Domestic policy analysis
- The GTAP Data Base and extensions


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