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Consumption is already subsidized in those countries by not internalizing the carbon externality. The border adjustment puts US exports on a level playing field
by rory096 9y ago
Consumption 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]