Carbon Leakage: Making the Best of a Second-Best Policy

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Congress is debating climate change legislation to reduce greenhouse gas emissions through the creation of a cap-and-trade system. Critics have expressed concern that this legislation could reduce domestic employment in trade-sensitive industries and cause a shift in production (and pollution) to less developed (and less regulated) countries. These critics have advocated a border adjustment policy to counter these effects. This article addresses the importance of identifying the emissions abatement policy objective (domestic versus global), then explores the competing analytical frameworks regarding border adjustment from trade and tax policy perspectives, and lastly describes the importance of political economy considerations in designing legislation. In short, while some type of border adjustment policy appears logical from a tax analysis standpoint, trade theory principles raise serious questions about this approach.

Scott C. Ganz was formerly the program manager for economic studies at AEI. He is currently a senior analyst at Matrix Global Advisors.

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Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

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Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

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