Pollution Permit Market and International Trade-Exposed Sector: Differentiated Allocations versus Border Adjustment

• Published in: Journal of institutional and theoretical economics Vol. 176; no. 3; pp. 473 - 495
• Main Authors: Naegelen, Florence, Mougeot, Michel
• Format: Journal Article
• Language: English
• Published: Tübingen Mohr Siebeck 01.01.2020
• Subjects: Adjustment; Auctions; Borders; Carbon; Climate policy; Competitiveness; Competitors; Domestic markets; Economic theory; Economics and Finance; Emissions trading; Environmental policy; Equilibrium; Humanities and Social Sciences; International trade; Market prices; Opportunity costs; Pollution; Power; Profits; Regulation; Society; Subsidies; Trade policy; Welfare; Windfall profits

To limit the loss of competitiveness when domestic firms are subject to stronger regulation than international competitors, a cap-and-trade policy can be associated either with partial grandfathering or with border adjustment. We compare the two policies from a domestic social-welfare point of view...