Given the bleak prospects for a global agreement on coordinated policies to mitigate climate change, political pressure is increasing among industrialized countries for unilateral abatement. A major challenge thereby is the appropriate response to the threat of emissions leakage. Border carbon adjustments and output-based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own. We assess the relative attractiveness of these anti-leakage measures as a function of the abatement coalition size. We first develop a partial equilibrium analytical framework to gain generic insights on how these instruments affect emissions within and outside the coalition. We then employ a large-scale computable general equilibrium model of international trade and energy use to assess the cost-effectiveness of alternative anti-leakage strategies as the coalition evolves toward global coverage. We find that full border adjustments rank first in global cost-effectiveness, followed by import tariffs and then output-based rebates. The differences across anti-leakage measures and the overall appeal of such measures decline with the size of the abatement coalition. In terms of cost incidence, the abatement coalition prefers border carbon adjustments over output-based rebates; the opposite holds true for countries outside the coalition.
Resources Magazine — Oct 4, 2023
Resources for the Future Welcomes Three New Fellows
Resources for the Future welcomes three new fellows to the research team whose work spans electricity markets, international climate policy, state and local policies, and environmental justice: Jenya Kahn-Lang, Milan Elkerbout, and Suzanne Russo.
Resources Radio — Oct 3, 2023
Cutting the Queue and Emissions in the US Power Sector, with Will Gorman
Will Gorman discusses the interconnection queue (the waiting list for developers that hope to connect power plants to the US electric grid), the reasons for recent growth in wait times, and reforms that could speed up the queue.
Common Resources — Sep 28, 2023
Designing Climate Policy for the Electricity Sector
Recent federal policy incentivizes low-carbon electricity generation. This conversation shares insights from experts about additional policy approaches that can help decarbonize the electricity sector while addressing environmental justice.
On the Issues — Sep 22, 2023
On the Issues: Equitable Climate Policy, Value of a Statistical Life, and More
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: equitable climate policy, value of a statistical life, and more.