A computable general equilibrium analysis of border adjustments under the cap-and-trade system: A case study of the Japanese economy

Shiro Takeda, Horie Tetsuya, Toshi H. Arimura

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Using a multi-region and multi-sector computable general equilibrium model, this paper evaluates the border adjustment policies of carbon regulations in Japan. We consider five types of border adjustments and examine their effects on the welfare, carbon leakage, and competitiveness of the Japanese energy-intensive trade-exposed (EITE) sectors. Our analysis shows that no single border adjustment policy is superior to the other policies in terms of simultaneously solving three primary issues: Welfare degradation, carbon leakage, and a loss of competitiveness in the EITE sectors. In addition, we show that export border adjustments are effective at restoring the competitiveness of Japanese exporters and reducing leakage. Our analysis also reveals that border adjustment in Japan significantly affects carbon leakage to China and the competitiveness of the iron and steel sectors. Finally, we show that border adjustments with and without consideration of indirect emissions have similar impacts, which indicates that the information regarding direct emissions is sufficient for implementing border adjustment in Japan.

Original languageEnglish
Article number1250003
JournalClimate Change Economics
Volume3
Issue number1
DOIs
Publication statusPublished - 2012 Feb 1

Keywords

  • CGE analysis
  • border adjustment
  • carbon leakage
  • climate change
  • competitiveness

ASJC Scopus subject areas

  • Global and Planetary Change
  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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