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/.

Click here to read the full article as an Adobe Acrobat PDF.

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.

Click here to read the full article as an Adobe Acrobat PDF.

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

Rebuilding American defense: A speech by Governor Bobby Jindal
image Smelling liberal, thinking conservative
image Stopping Ebola before it turns into a pandemic
image All too many reasons for pessimism about Europe
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Event Registration is Closed
Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Event Registration is Closed
Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.