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GTAP Resource #3851

"Carbon tariffs for financing clean development"
by Springmann, Marco

In order to address carbon leakage and preserve the competitiveness of domestic industries, some industrialized Annex-I countries have proposed to levy carbon tariffs on energy-intensive imports from developing non-Annex-I countries which have not agreed to binding emissions reductions. This could have detrimental welfare impacts, especially on those developing countries, and might not lead to significant reductions in leakage.

A possible remedy recently proposed is to use the revenues from carbon tariffs for clean-development financing in the exporting non-Annex-I countries. This study analyses this policy proposal by using an energy-economic CGE model of the global economy. It supplements the model by marginal-abatement-cost curves and bottom-up information on abatement potentials in non-Annex-I countries to represent the emission-reduction effects of clean-development financing. The economic effects are modelled in a generic fashion by changes in general investments which induce further changes in demand and production processes. A comprehensive sensitivity analysis considers different specifications of the investment channel and of the carbon-tariff-clean-development policy studied.

The results indicate that US$3.5-24.5 billion (with a central value of US$9.8 billion) could be raised for clean-development financing. This financing could reduce non-Annex-I countries’ emissions by 5-15%, while still leaving funds available for other purposes, such as adaptation. Recycling the revenues from carbon tariffs back to the exporting country could alleviate some of the negative welfare impacts associated with carbon tariffs, but a net negative impact especially on developing countries welfare and GDP levels would remain.

Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland; Climate Policy (forthcoming)
Date: 2012
Created: Springmann, M. (4/28/2012)
Updated: Springmann, M. (4/28/2012)
Visits: 2,081
- Economic development
- Climate change policy

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