Alan K. Fox

Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions

The allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account. We compare different rules for allocating carbon allowances within sectors (lump-sum grandfathering, output-based allocation (OBA), auctioning) and among sectors (historical emissions or value-added shares). The output subsidies implicit in OBA mitigate tax interactions, unlike grandfathering. OBA with sectoral distributions based on value added is similar to revenue recycling with auctioning. OBA based on historical emissions supports heavier polluters, more effectively counteracting carbon leakage, but at higher welfare costs. Less energy-intensive sectors are also sensitive to allocation rules. (JEL Q 53)

Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions

Emissions regulations like carbon pricing raise the price of covered sector goods and thus can interact with and exacerbate other preexisting distortions in the economy. One such distortion is labor taxes. Another is emissions “leakage” due to the lack of comparable emissions pricing abroad or among other emitting sectors at home. A potential response is to combine the emissions tax with a rebate to production to mitigate the price increases. We use an optimal tax framework to solve for the optimal emissions tax and output rebate, given these distortions. We then employ a multisector computable general equilibrium model based on the GTAP framework to simulate the effects of a

Why don’t foreign firms cooperate in US antidumping investigations? An empirical analysis

50 per-ton carbon tax on the major emissions-intensive sectors in the U.S. economy and estimate optimal rebates by sector.

The emission reduction effect and economic impact of an energy tax vs. a carbon tax in China : a dynamic CGE model analysis

Foreign firms face punitive duties if they do not cooperate with the US Department of Commerce (DOC) in antidumping procedures. For example, 37% of all foreign firms involved in antidumping investigations in the US faced “facts available” margins for the 1995–2002 period, with average antidumping duties of 31% for cooperating foreign firms, compared to 87% for those who did not cooperate. The existing literature has focused on how DOC discretion has led to foreign firm non-cooperation. This paper instead examines individual foreign firm’s decisions about whether to cooperate during this same period. We find evidence that non-cooperation is consistent with a model of foreign firms rationally choosing not to cooperate, rather than solely as a result of investigating authority bias against imports.

Is Puerto Limon a real lemon? Port inefficiency and its impact

Carbon tax and energy tax are among the hot discussions in China. This study conducts simulation studies on them with a CGE model and analyzes their economic impacts, especially on the energy-intensive sectors. The Chinese economy is affected at an acceptable level by the two taxes in different scenarios. The import and export of energy-intensive industries are changed, leading to improved domestic competitiveness. Compared with implementing a single tax, a combined carbon-energy tax reduces more emissions with relatively smaller economic costs. For China, the sooner such taxes are launched, the smaller the economic costs and the more significant emission reductions.

A Computational Analysis of the Effects of Reductions in U.S. Military Expenditures

This paper presents a comparative analysis of the inefficient Puerto Limon in Costa Rica and the efficient port of Cartagena in Colombia, illustrating the influence of port efficiency on the costs of maritime transport and the damaging impact this has upon trade. An attempt is made to identify the underlying causes of disaggregated disparities in cost efficiency and to arrive at an aggregate cost of inefficiency. This is then treated as a tax in the Global Trade Analysis Project (GTAP) model to quantify the impact that port inefficiency has had on trade and welfare. The conclusions reveal that Central Americas high freight rates cannot be solely attributed to low cargo volumes, as is sometimes claimed; port inefficiencies are also a culprit in that they exert a significant influence in terms of additional fuel costs, as well as the number of ships which carriers deploy, through overly long loading and discharging times. These all serve to undermine Costa Ricas terms of trade and, in the long run, have a negative effect on the nations trade, economy and consumer welfare. While the difficulties in doing so are acknowledged, the authors propose that inducing competition, particularly port privatization, is the way towards port reform that will advance Central American nations, such as Costa Rica, whose economies are suffering as a result of an inefficient port sector.

Comparing policies to combat emissions leakage: Border carbon adjustments versus rebates

With the end of the ‘Cold War’ and attendant fragmentation of the former Soviet Union, Soviet military influence no longer poses a grave threat to international security. The destruction of Iraq’s military capabilities and the opening of the Israeli-Arab dialogue may also have served to reduce the potential for large-scale conflict in the Middle East. The confluence of these remarkable changes suggests that there may now be considerable scope for reduction in military expenditures in the USA especially, as well as in other major countries. It is in this light that we use the computational general equilibrium (CGE) Michigan Model of World Production and Trade to analyse the impact of a 25 per cent unilateral reduction in US military spending.2