1887

OECD Food, Agriculture and Fisheries Papers

NB. No. 1 to No. 58 were released under the previous series title OECD Food, Agriculture and Fisheries Working Papers.

English

Global assessment of the carbon leakage implications of carbon taxes on agricultural emissions

Carbon leakage arises when emission reductions in countries applying a carbon tax are offset, partially or completely, by emission increases in countries that do not apply the tax or any other greenhouse gas (GHG) mitigation policies. Analysis using the MAGNET computable general equilibrium model indicates that a carbon tax always lowers global GHG emissions from agriculture, even when it is applied in a small group of countries, provided that producers facing the tax can make use of GHG abatement technologies. This suggests that mitigation policies should be considered in conjunction with investments in research and development on abatement practices and technologies. When a small number of countries adopt a carbon tax, about half of the direct reduction in emissions in adopting counties is offset by higher emissions in non-adopting countries; the rate of carbon leakage declines as the group of countries implementing a carbon tax expands. Higher tax rates stimulate larger global emissions reductions, but also induce higher rates of emissions leakage, thus limiting the mitigation benefits from setting higher tax rates in contexts where few countries adopt the policy.

English

Keywords: Trade, Environmental policies, Climate change, Mitigation
JEL: Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming; Q17: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Agriculture / Agriculture in International Trade; F18: International Economics / Trade / Trade and Environment; C68: Mathematical and Quantitative Methods / Mathematical Methods; Programming Models; Mathematical and Simulation Modeling / Computable General Equilibrium Models; Q11: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Agriculture / Agriculture: Aggregate Supply and Demand Analysis; Prices; O13: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
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