Analyzing the Impacts of Carbon-Motivated Border Tax Adjustment to China's Industrial Exports - A CGE Based Simulation

Carbon-motivated border tax adjustment is a unilateral policy aimed to compensate the loss of competitiveness of carbon intensive products due to carbon dioxide abatement actions. It violates fundamental principle of the UNFCCC, and potentially conflict with the core WTO principle of non-discrimination, reflected in the GATT Articles I and III. Based on the analysis of embodied carbon emission of China's industrial exports, this paper evaluates with a recursive dynamic CGE model the potential impacts of carbon duty to China's industrial production, exports, and employments. The authors also suggest for several measures of alleviating the impacts of the carbon-motivated border tax adjustment.