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GTAP Resource #7321

"Cross-border effects of climate policy packages in North America"
by Fournier, Jean-Marc, Tannous Kass-Hanna, Liam Masterson, Anne-Charlotte Paret and Sneha Thube

We quantify cross-border effects of the recent climate mitigation policies introduced in Canada and the US, using the global general equilibrium model IMF-ENV. Notably, with the substantial emission reductions from Canada’s carbon tax-led mitigation policies and the US’ Inflation Reduction Act, these two countries would bridge two-thirds of the gap toward their Nationally Determined Contribution (NDC) goals. While the broadly divergent policies are believed to elicit competitiveness concerns, we find the aggregate cross-border effects within North America to be very limited and restricted to the energy intensive and trade exposed industries. Potential carbon leakages are also found to be negligible. A more meaningful difference triggered by policy heterogeneity is rather domestic, especially with US subsidies increasing energy output while the Canada model with a carbon tax would marginally decrease it. This analysis is complemented by a stylized model illustrating how such divergence can affect the terms of trade, but also how these effects can be countered by exchange rate flexibility, border adjustments or domestic taxation.

Resource Details (Export Citation) GTAP Keywords
Category: 2024 Conference Paper
Status: Not published
By/In: Presented during the 27th Annual Conference on Global Economic Analysis (Fort Collins, Colorado, USA)
Date: 2024
Created: Thube, S. (4/15/2024)
Updated: Thube, S. (4/15/2024)
Visits: 91
- Climate change policy
- Conventional energy
- Renewable energy
- Trade and the environment
- Domestic policy analysis
- North America

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