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.

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

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Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

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Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

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Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

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