About
The linking of energy, climate, and trade policies has long offered a promising avenue for reducing greenhouse gas (GHG) emissions in the United States (U.S.), while also encouraging emerging economies to pursue climate action and energy decarbonization. In recent years, the coupling of energy and trade policies in the U.S. have gained increased interest and traction. These U.S. clean energy proposals have centered on two components: (1) domestic policies that promote U.S. clean energy adoption (through either pollution taxes or clean energy subsidies) and (2) restrictions on imports that protect U.S. clean energy producers from foreign competition (through carbon import tariffs). This is driven both by domestic concerns over U.S. industrial competitiveness and in response to circumstances developing outside the U.S.
However, the continued failure to pass enduring domestic U.S. energy policies – combined with an emerging bipartisan interest in using import tariffs to protect domestic industries – has led U.S. energy, trade, and climate legislation to focus solely on carbon-related import restrictions and to forgo domestic policies. A U.S. carbon tariff, without corresponding domestic clean energy or climate policies, may not only be largely ineffective, but it could set a problematic global precedent for international carbon tariffs that could undercut meaningful global action on decarbonization. Since domestic policy is needed to induce clean energy adoption, it’s unclear if this approach would lower global GHG emissions. To date, there has yet to be systematic, rigorous academic analysis on carbon tariff proposals. Few existing trade models exist to capture the complexity of energy production and consumption that are needed for this analysis. Historically, trade models have focused on sophisticated modeling of international trade, with less attention paid to how energy is produced and consumed across economies. Energy models, on the other hand, focus on characterizing the micro-structure of energy markets but focus less on how this energy (and thus carbon emissions) is traded or embedded in traded goods.
This project seeks to advance and extend the coupling of energy and trade models to better analyze and understand the environmental and economic impacts and tradeoffs of U.S. energy and trade policies, such as carbon tariffs.