Carbon Border Adjustments, Climate Clubs, and Subsidy Races When Climate Policies Vary / Kimberly A. Clausing, Catherine Wolfram.

Format:

Book

Author/Creator:

Clausing, Kimberly A.

Contributor:

National Bureau of Economic Research.

Wolfram, Catherine.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31310.

NBER working paper series no. w31310

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Jurisdictions adopt heterogeneous climate policies that vary both in terms of ambition and in terms of policy approach, with some jurisdictions pricing carbon and others subsidizing clean production. We distinguish two types of policy spillovers associated with diverse policy approaches to climate change. First, when countries have different levels of climate ambition, free-riders will benefit at the expense of more committed countries. Second, when countries pursue different approaches, carbon-intensive producers within cost-imposing jurisdictions will be at a relative competitive disadvantage compared with producers in subsidizing jurisdictions. Carbon border adjustments and climate clubs are attempts to respond to these policy spillovers, but when countries have divergent policy approaches, one policy alone will not be able to address both types of spillovers. We also consider the policy dynamics that result from carbon border adjustments and climate clubs; both have the potential to encourage upward harmonization of climate policy, but they come with risks. Further, the pressures of international competition in the presence of divergent climate policy approaches may result in subsidy races, which come with their own potential risks and benefits.

Notes:

Print version record

June 2023.