3 ms·
This sounds like a great idea. The best part is it gets the government out of managing, so that the market can best operate based on properly-aligned incentive
by em3rgent0rdr 9y ago
This sounds like a great idea. The best part is it gets the government out of managing, so that the market can best operate based on properly-aligned incentives.
There is one thing I didn't understand:
"American companies exporting to countries without comparable carbon pricing would receive rebates on the carbon taxes they’ve paid on those products"
Wouldn't that subsidise and hence encourage exports to these counties? That would benefit the economy of those countries. I don't think that is desired.
- rory096 9y agoConsumption is already subsidized in those countries by not internalizing the carbon externality. The border adjustment puts US exports on a level playing field with other products in that country, saving the distortionary effects of imbalanced taxes. Meanwhile, the import tax adjustment makes sure that goods from that non-complying country aren't at an unfair advantage. But of course optimally all countries pass a similar carbon tax in the medium term so border adjustments are unnecessary.
- em3rgent0rdr 9y agoI'm not sure more subsidies are the best way to combat subsidies. I worry such export subsidies will cause consumers in those countries to increase consumption and make those countries reluctant to pass a similar tax.
- rory096 9y agoThose countries already have outsized consumption because carbon externalities are not priced in. Failing to border adjust a domestic US carbon tax would incentivize them to import less, not necessarily consume less.
- deleted 9y ago[deleted]