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

For a complete listing of all On the Margin articles, please visit: www.aei.org/onthemargin/.

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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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Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

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Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

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