The Effects of Border Adjustment
Policies on Developing Countries
Knut Einar Rosendahl
Statistics Norway and RFF (Visiting scholar)
Presentation May 5th 2009
Trade and Climate Change:
Development Aspects of Climate Change Policies of OECD Countries
1
Introduction
•
Purpose: Examine effects on welfare
welfare, trade and carbon
leakage of unilateral U.S. carbon policies
– Focus on p
policies towards Energy-intensive
gy
sectors ((EIS))
Š Sensitive to carbon policies
Š Significant international trade volumes
– Compare different climate policies
policies, ii.e.,
e cap
cap-and-trade
and trade system with:
1.
2.
3
3.
4.
Full auctioning
Output based allocation to EIS
Export exemption/rebate for EIS
Import tariffs for EIS
– Based on embodied carbon (with/without indirect emissions from power
production)
5. Full border adjustment (Export exemption and Import tariffs)
2
Introduction (cont.)
(cont )
• Method:
– Global economic model divided into 16 regions(/countries) and 12
sectors/goods
g
Š Mostly energy producing and energy intensive sectors
– Supply and demand in each region and sector is modeled, and so is
bilateral trade between regions
Š Based on GTAP7 database for 2004
• Assumptions:
p
– No change in policies in other countries
Š No cap on emissions in Annex B
• NB! Results are preliminary
3
Welfare effects in the U
U.S.
S of different climate
policies (20% cut in emissions)
Per cen
nt
-0
0,1
1
-0,11
,
“out”:
Outputbased
allocation
-0,12
“exempt”:
Export
exemption
“tariff”:
Import tariff
tariff
tariff_dc
-0,13
auction
btax
out
btax_dc
-0,14
exempt
-0,15
“btax”:
“
“exempt”
t” &
“tariff”
“_dc”:
Only direct
emissions
4
International welfare effects of different U
U.S.
S
climate policies (20% cut in emissions)
0,2
“out”:
Outputbased
allocation
0
-0,2
“exempt”:
Export
exemption
Per ce
ent
-0,4
“tariff”:
Import tariff
-0,6
auction
-0,8
out
exempt
“btax”:
“
“exempt”
t” &
“tariff”
tariff_dc
-1
tariff
btax_dc
_
btax
“_dc”:
Only direct
emissions
ld
w
or
FR
th
A
O
SI
A
IN
D
N
C
H
th
A
O
O
th
A
M
ER
BR
A
EX
M
PE
C
O
th
FS
U
O
S
R
U
.N
Z
Au
st
N
JP
U
R
th
E
O
EU
R
C
AN
-1,2
5
International welfare effects of different U
U.S.
S
climate policies (20% cut in emissions)
0,2
“out”:
Outputbased
allocation
0,15
0,1
“exempt”:
Export
exemption
0
“tariff”:
Import tariff
-0,05
-0,1
auction
out
exempt
-0,15
“btax”:
“
“exempt”
t” &
“tariff”
tariff_dc
tariff
-0,2
btax_dc
btax
“_dc”:
Only direct
emissions
ld
w
or
FR
th
A
O
SI
A
th
A
O
IN
D
N
C
H
th
AM
ER
O
BR
A
EX
M
PE
C
O
S
th
FS
U
O
R
U
.N
Z
Au
st
N
JP
U
R
th
E
O
EU
R
-0,25
C
AN
Per ce
ent
0,05
6
Effects on carbon leakage of different U
U.S.
S
climate policies (20% cut in emissions)
30
auction
“out”:
Outputbased
allocation
out
exempt
25
tariff_dc
tariff
“exempt”:
Export
exemption
btax_dc
20
15
“tariff”:
Import tariff
“btax”:
“
“exempt”
t” &
“tariff”
10
“_dc”:
Only direct
emissions
5
or
ld
W
FR
th
A
O
SI
A
IN
D
N
C
H
th
A
O
O
th
A
M
ER
BR
A
M
EX
C
PE
O
th
FS
U
O
S
RU
.N
Z
Au
st
JP
N
th
EU
R
O
EU
R
0
C
AN
Per cen
nt
btax
7
Effects on carbon leakage of different U
U.S.
S
climate policies (20% cut in emissions)
8
auction
“out”:
Outputbased
allocation
out
7
exempt
tariff_dc
6
tariff
iff
btax_dc
4
“tariff”:
Import tariff
3
“btax”:
“
“exempt”
t” &
“tariff”
2
“_dc”:
Only direct
emissions
1
or
ld
W
FR
th
A
O
IN
D
N
CH
th
AS
IA
O
O
th
A
M
ER
BR
A
M
EX
C
PE
O
th
FS
U
O
S
R
U
Au
st
.N
Z
JP
N
th
EU
R
O
EU
R
0
C
AN
Per ce
ent
“exempt”:
Export
exemption
btax
5
8
1
Effects on U
U.S.
S production of different U
U.S.
S
climate policies (20% cut in emissions)
“out”:
Outputbased
allocation
0
auction
-1
“exempt”:
Export
exemption
out
exempt
Per ce
ent
tariff_dc
tariff
-2
“tariff”:
Import tariff
btax_dc
btax
“btax”:
“
“exempt”
t” &
“tariff”
-3
“_dc”:
Only direct
emissions
-4
-5
OtherManuf&Serv
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
9
Effects on Chinese exports of different U
U.S.
S
climate policies (20% cut in emissions)
“out”:
Outputbased
allocation
2
Per cent
0
“exempt”:
Export
exemption
-2
“tariff”:
Import tariff
auction
-4
out
exempt
tariff_dc
tariff
-6
btax_dc
btax
“btax”:
“
“exempt”
t” &
“tariff”
“_dc”:
Only direct
emissions
-8
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
10
Some conclusions
• Total welfare effects are significantly affected by impacts in
fossil fuel (FF) markets
– FF exporters lose and FF importers gain
– FF effect is strengthened by tariffs and reduced by output-based all.
• Majority of leakage takes place in other OECD countries
– Coordination of OECD policy reduces leakage problem
– Border adjustment policies more effective than output-based all.
• Trade in energy-intensive goods is significantly affected by
choice of climate policy
11
Effects on Indian exports of different U.S.
U S climate
policies (20% cut in emissions)
4
“out”:
Outputbased
allocation
2
0
-4
“tariff”:
Import tariff
Per centt
-2
“exempt”:
Export
exemption
auction
out
exempt
-6
tariff_dc
tariff
btax_dc
-8
btax
“btax”:
“
“exempt”
t” &
“tariff”
“_dc”:
Only direct
emissions
-10
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
12
Effects on Other Asian exports of different U
U.S.
S
climate policies (20% cut in emissions)
3
auction
2,5
out
exempt
2
tariff dc
tariff_dc
tariff
btax_dc
1,5
Per cent
btax
“out”:
Outputbased
allocation
“exempt”:
Export
exemption
1
“tariff”:
Import tariff
0,5
“btax”:
“
“exempt”
t” &
“tariff”
0
“_dc”:
Only direct
emissions
05
-0,5
-1
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
13
1,5
Effects on Other African exports of different U
U.S.
S
climate policies (20% cut in emissions)
“out”:
Outputbased
allocation
1
“exempt”:
Export
exemption
Per ce
ent
0,5
0
“tariff”:
Import tariff
auction
-0,5
“btax”:
“
“exempt”
t” &
“tariff”
out
exempt
tariff_dc
tariff
-1
“_dc”:
Only direct
emissions
btax_dc
btax
-1,5
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
14
5
Effects on Brazilian exports of different U
U.S.
S
climate policies (20% cut in emissions)
auction
4,5
out
exempt
4
tariff_dc
tariff
3,5
btax_dc
btax
Per ce
ent
3
2,5
“out”:
Outputbased
allocation
“exempt”:
Export
exemption
“tariff”:
Import tariff
2
“btax”:
“
“exempt”
t” &
“tariff”
1,5
1
“_dc”:
Only direct
emissions
0,5
0
PaperPulpPrint
Chemical
Minerals
IronSteel
NonFerrousMetal
15