Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296105 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11016
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Border Carbon Adjustment Mechanisms (BCAMs) are becoming reality in the EU and elsewhere, and recur—in very different form—in U.S. legislative proposals. But they remain contentious, with features and differences that leave the underlying welfare rationale and implications unclear. Exploring these, this paper establishes two general principles for Pareto efficient BCAM design: regulatory measures should be recognized symmetrically with explicit carbon prices; and, whatever the ambition of mitigation in the BCA-imposing country, a general 'difference-in-differences' form of a BCAM is appropriate. These nest, as special cases, the very different approaches to BCAM design in Europe and the U.S.
Subjects: 
environmental taxation
carbon pricing
border tax adjustment
international taxation
JEL: 
H21
H23
H87
F18
Document Type: 
Working Paper
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