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Measures Against Carbon Leakage: Combining Output-Based Allocation with Consumption Taxes

Christoph Böhringer et al.

Journal of the Association of Environmental and Resource Economists2025https://doi.org/10.1086/736753article
AJG 3ABDC A*
Weight
0.44

Abstract

Countries with ambitious climate targets are concerned about carbon leakage to countries with \nmore lenient or no carbon pricing. A common policy measure against leakage is output-based \nallocation of emissions allowances, whose effectiveness could be further enhanced by consumption \ntaxes levied on the carbon intensity of goods. We combine theoretical and numerical analysis to \nderive optimal combinations of output-based allocation and consumption taxes for different \nassumptions on the stringency of emissions reduction targets, the coverage of emissions in \nregulated sectors, and their trade exposure. A key analytical finding is that output-based allocation \nand consumption taxes are complements rather than substitutes, i.e., the extent of output-based \nallocation should be higher if combined with a consumption tax. A key numerical finding is that the \noptimal output-based allocation and consumption tax rates should be set at almost the same rate \nand increase substantially with the stringency of the emissions reduction targets.

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https://doi.org/https://doi.org/10.1086/736753

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@article{christoph2025,
  title        = {{Measures Against Carbon Leakage: Combining Output-Based Allocation with Consumption Taxes}},
  author       = {Christoph Böhringer et al.},
  journal      = {Journal of the Association of Environmental and Resource Economists},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1086/736753},
}

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Evidence weight

0.44

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.32 × 0.4 = 0.13
M · momentum0.57 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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