Most economists agree that the best way to reduce carbon dioxide emissions that cause global warming is by implementing a carbon tax, and making it more expensive to buy products and services with a high carbon content. Yet by putting a price on carbon, countries may drive up costs for domestic businesses, putting them at a competitive disadvantage to foreign competitors from countries where no carbon price exists.

Two experts in climate law and economics look at the most commonly proposed solution to protect American businesses from the competitive impacts of a carbon tax. The solution, known as a border adjustment, would ensure that American and imported goods are subject to the same carbon price.

David Weisbach is a professor of law at the University of Chicago. Sam Kortum is an economics professor at Yale University. Their work has focused on the role of taxation in addressing climate change, and potential competitive implications of a carbon tax.

Via Kleinman Center of Energy Policy

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Climate Change
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Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Climate Economics
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Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...
Climate Law & Policy
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Climate Law & Policy
As countries around the world implement policies to confront climate change, EPIC research is calculating which policies will have the most impact for the least cost.
A Solution to the Leakage Problem
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A Solution to the Leakage Problem
A simple, clearly legal, and more effective alternative to border tax adjustments could be to tax domestic extraction along with border adjustments on imports and exports of energy.
Definition
Fossil Fuels
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...