Trade, Outsourcing, and the Environment
This paper analyzes the effects of carbon taxation and border carbon adjustments in a setting where firms can choose to respond to taxation by abating or by outsourcing part of their production. For this, this paper sets up a general equilibrium trade model, calibrated with world trade and input-output data that features a discrete choice production structure, where the producers choose between outsourcing or abating emission-intensive intermediate production steps. The paper finds that border adjustments that cannot target scope 3 emissions can lead to outsourcing, and thus leakage, further down the value chain, but nevertheless induce higher abatement both in the countries that impose the border adjustment and in the ones affected by it.
| Main Authors: | , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2024-01-22
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| Subjects: | BORDER CARBON ADJUSTMENT, ENVIRONMENT AND TRADE, CARBON TAX, CARBON TARIFFS, CO2 EMISSION LEAKAGE, ENVIRONMENTAL POLICY, |
| Online Access: | http://documents.worldbank.org/curated/en/099321301112414585/IDU1e2f5c11c11f0614c5c19f511696a41248dec https://openknowledge.worldbank.org/handle/10986/40931 |
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