The adoption of domestic emissions trading schemes (ETS) can impose a heavy burden on energy-inte... more The adoption of domestic emissions trading schemes (ETS) can impose a heavy burden on energy-intensive industries. In particular, energy-intensive industries competing with foreign competitors could lose their international edge. Although the abatement of carbon dioxide (CO 2 ) emissions in industrialized countries entails the reduction of their energy-intensive production, a corresponding increase in the production of energy-intensive goods in countries without CO 2 regulations may lead to carbon -leakage.‖ This paper examines the effects of various allocation methods for granting emissions permits in the Japanese ETS on the economy and CO 2 emissions using a multiregional and multisector computable general equilibrium model. Specifically, we apply the Fischer and Fox (2007) model to the Japanese economy to address carbon leakage and competitiveness issues. We compare auction schemes, grandfathering schemes, and output-based allocation (OBA) schemes. We further extend the model by examining a combination of auctions and OBA. Though the auction scheme is found to be the best in terms of macroeconomic impacts (welfare and GDP effects), the leakage rate is high and the harm to energy-intensive sectors can be significant. OBA causes less leakage and damage to energy-intensive sectors, but the macroeconomic impact is undesirable. Considering all three effects-leakage, competitiveness, and macroeconomics-we find that combinations of auctions and OBA (with gratis allocations solely to energy-intensive, trade-exposed sectors) are desirable.
Foreign firms face punitive duties if they do not cooperate with the US Department of Commerce (D... more 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 chose 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 do not. 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. a The views expressed in this paper are the authors' own and do not represent those of the U.S. International Trade Commission. b We would like to thank s seminar participants at Tilburg University, George Washington University, the Southern Economics Association meetings in Washington, DC and the Midwest International Economics Group meetings at Michigan State University. Maggie Chen deserves special thanks. Remaining errors are our own.
Discussion papers are research materials circulated by their authors for purposes of information ... more Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review.
We explore conditions determining which anti-leakage policies might be more effective complements... more We explore conditions determining which anti-leakage policies might be more effective complements to domestic GHG emissions regulation. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border tax on imports, a border rebate for exports, full border adjustment, and a domestic production rebate. While all have the potential to support domestic production, none is necessarily effective at mitigating emissions leakage. Nor is it possible to rank order the options. In each case, the effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes.
Comparing Policies to Combat Emissions Leakage Border Carbon Adjustments versus Rebates C a r o l... more Comparing Policies to Combat Emissions Leakage Border Carbon Adjustments versus Rebates C a r o l y n F i s c h e r a n d A l a n K. F o x
Discussion papers are research materials circulated by their authors for purposes of information ... more Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review.
portion of this paper may be reproduced without permission of the authors. Discussion papers are ... more portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment.
Carbon tax and energy tax are among the hot discussions in China. This study conducts simulation ... more 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.
In this paper I analyze the performance of the Michigan Model of Production and Trade in simulati... more In this paper I analyze the performance of the Michigan Model of Production and Trade in simulating the impact of trade liberalization under the North American Free Trade Agreement, reviewing the results of Brown, Deardorff, and Stern (1992). Because the NAFTA entered into force only part way through the phase-in of the U.S.-Canada FTA accord, I consider their joint impact on the pattern of relative trade flows. The methodology draws on the Fox (2000) analysis of the U.S.-Canada FTA. A substantial innovation in this paper is the reimplementation of the model using MPSGE/GAMS. Preliminary results suggest that the model performs best when simulating the impact on the already-substantial trade flows between U.S.-Canada and U.S.-Mexico. The expansion of certain sectors that had little pre-NAFTA trade highlights the difficulty of using a CES specification.
USAGE (also known as MONASH-USA) is a detailed dynamic general equilibrium model of the US being ... more USAGE (also known as MONASH-USA) is a detailed dynamic general equilibrium model of the US being developed by the Centre of Policy Studies in collaboration with the U.S. International Trade Commission. In common with all MONASH-style general equilibrium models, USAGE is designed to facilitate four types of analyses: Historical simulations, that estimate the paths of unobservable variables over a historical period, such as changes in technology and consumer preferences; Decomposition simulations, in which periods of economic history are explained in the context of the model and with reference to various driving factors estimated in the historical simulation; Forecasting simulations, in which forecast or “business as usual” baselines consistent with historical structural processes (derived from historical and decomposition analysis) and expert opinion are generated, in part to act as baselines for policy analysis; and Policy simulations, where policy and other structural changes are i...
In this paper I analyze the performance of the Michigan Model of Production and Trade in simulati... more In this paper I analyze the performance of the Michigan Model of Production and Trade in simulating the impact of trade liberalization under the North American Free Trade Agreement, reviewing the results of Brown, Deardorff, and Stern (1992). Because the NAFTA entered into force only part way through the phase-in of the U.S.-Canada FTA accord, I consider the ir joint impact on the pattern of relative trade flows. The methodology draws on the Fox (2000) analysis of the U.S.-Canada FTA. A substantial innovation in this paper is the reimplementation of the model using MPSGE/GAMS. Preliminary results suggest that the model performs best when simulating the impact on the already-substantial trade flows between U.S.-Canada and U.S.-Mexico. The expansion of certain sectors that had little pre-NAFTA trade highlights the difficulty of using a CES specification.
We use the GTAP model together with version 3 (base year 1992) of the GTAP database to simulate t... more We use the GTAP model together with version 3 (base year 1992) of the GTAP database to simulate the removal of tariff and non-tariff barriers between U.S., Canada, and Mexico under NAFTA. Our paper has two objectives. First is to evaluate the predictions made by GTAP against the actual post-NAFTA changes in NAFTA trade. Recent literature (Kehoe, 2005; Shikher, 2012) finds that pre-NAFTA predictions of the effects of NAFTA on trade have little correlation with the actual changes. Therefore, we wanted to investigate whether GTAP could have produced accurate predictions if it were used before NAFTA. The second objective is to compare the predictions of GTAP against the predictions of a general equilibrium model based on the Eaton and Kortum (2002) methodology with heterogeneous producers. We wanted to investigate if the two models would produce different predictions and investigate the sources of these differences. We find that the changes in NAFTA trade predicted by GTAP using pre-NAF...
This paper documents the construction of consistent social accounts that cover the period from 19... more This paper documents the construction of consistent social accounts that cover the period from 1978 to 2001 for the U.S. economy at a two-digit level of aggregation. There are four primary data sources for the construction of the accounts. First, the Bureau of Economic Analysis (BEA) publishes a Gross Domestic Product by Industry (GDPI) series that includes value added by factor and sector (at approximately the two-digit level). The series also includes other useful measures of total intermediate inputs and various double-deflation indices for conversion of current dollar measures into real measures. The second primary data source is the benchmark input-output (BIO) accounts published by the BEA. The input-output accounts allow us to decompose intermediate inputs by two-digit commodity, although they are only available for select years. The third source is the U.S. Department of Commerce (DOC) customs level data on annual merchandise trade (Trade Policy Information Service of the DO...
This paper reviews the ITC experience with policy applications of CGE modeling, including applica... more This paper reviews the ITC experience with policy applications of CGE modeling, including applications of the ITC model and of GTAP. The paper reviews the history and role of CGE modeling at the ITC, starting with the development of the first ITC CGE model and culminating with the current effort to develop the USAGE model with Monash. An overview will be provided on the contribution GE models to policy debates in the US. The paper emphasizes how the modeling work fits into the trade-policy debate in the US, and how the ITCi¦s experience has led it to seek development of a modeling framework that better meets its customers demands, particularly for policy scenario projections and increased analysis of regional and adjustment issues.
The adoption of domestic emissions trading schemes (ETS) can impose a heavy burden on energy-inte... more The adoption of domestic emissions trading schemes (ETS) can impose a heavy burden on energy-intensive industries. In particular, energy-intensive industries competing with foreign competitors could lose their international edge. Although the abatement of carbon dioxide (CO 2 ) emissions in industrialized countries entails the reduction of their energy-intensive production, a corresponding increase in the production of energy-intensive goods in countries without CO 2 regulations may lead to carbon -leakage.‖ This paper examines the effects of various allocation methods for granting emissions permits in the Japanese ETS on the economy and CO 2 emissions using a multiregional and multisector computable general equilibrium model. Specifically, we apply the Fischer and Fox (2007) model to the Japanese economy to address carbon leakage and competitiveness issues. We compare auction schemes, grandfathering schemes, and output-based allocation (OBA) schemes. We further extend the model by examining a combination of auctions and OBA. Though the auction scheme is found to be the best in terms of macroeconomic impacts (welfare and GDP effects), the leakage rate is high and the harm to energy-intensive sectors can be significant. OBA causes less leakage and damage to energy-intensive sectors, but the macroeconomic impact is undesirable. Considering all three effects-leakage, competitiveness, and macroeconomics-we find that combinations of auctions and OBA (with gratis allocations solely to energy-intensive, trade-exposed sectors) are desirable.
Foreign firms face punitive duties if they do not cooperate with the US Department of Commerce (D... more 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 chose 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 do not. 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. a The views expressed in this paper are the authors' own and do not represent those of the U.S. International Trade Commission. b We would like to thank s seminar participants at Tilburg University, George Washington University, the Southern Economics Association meetings in Washington, DC and the Midwest International Economics Group meetings at Michigan State University. Maggie Chen deserves special thanks. Remaining errors are our own.
Discussion papers are research materials circulated by their authors for purposes of information ... more Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review.
We explore conditions determining which anti-leakage policies might be more effective complements... more We explore conditions determining which anti-leakage policies might be more effective complements to domestic GHG emissions regulation. We consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness: a border tax on imports, a border rebate for exports, full border adjustment, and a domestic production rebate. While all have the potential to support domestic production, none is necessarily effective at mitigating emissions leakage. Nor is it possible to rank order the options. In each case, the effectiveness depends on the relative emissions rates, elasticities of substitution, and consumption volumes.
Comparing Policies to Combat Emissions Leakage Border Carbon Adjustments versus Rebates C a r o l... more Comparing Policies to Combat Emissions Leakage Border Carbon Adjustments versus Rebates C a r o l y n F i s c h e r a n d A l a n K. F o x
Discussion papers are research materials circulated by their authors for purposes of information ... more Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review.
portion of this paper may be reproduced without permission of the authors. Discussion papers are ... more portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment.
Carbon tax and energy tax are among the hot discussions in China. This study conducts simulation ... more 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.
In this paper I analyze the performance of the Michigan Model of Production and Trade in simulati... more In this paper I analyze the performance of the Michigan Model of Production and Trade in simulating the impact of trade liberalization under the North American Free Trade Agreement, reviewing the results of Brown, Deardorff, and Stern (1992). Because the NAFTA entered into force only part way through the phase-in of the U.S.-Canada FTA accord, I consider their joint impact on the pattern of relative trade flows. The methodology draws on the Fox (2000) analysis of the U.S.-Canada FTA. A substantial innovation in this paper is the reimplementation of the model using MPSGE/GAMS. Preliminary results suggest that the model performs best when simulating the impact on the already-substantial trade flows between U.S.-Canada and U.S.-Mexico. The expansion of certain sectors that had little pre-NAFTA trade highlights the difficulty of using a CES specification.
USAGE (also known as MONASH-USA) is a detailed dynamic general equilibrium model of the US being ... more USAGE (also known as MONASH-USA) is a detailed dynamic general equilibrium model of the US being developed by the Centre of Policy Studies in collaboration with the U.S. International Trade Commission. In common with all MONASH-style general equilibrium models, USAGE is designed to facilitate four types of analyses: Historical simulations, that estimate the paths of unobservable variables over a historical period, such as changes in technology and consumer preferences; Decomposition simulations, in which periods of economic history are explained in the context of the model and with reference to various driving factors estimated in the historical simulation; Forecasting simulations, in which forecast or “business as usual” baselines consistent with historical structural processes (derived from historical and decomposition analysis) and expert opinion are generated, in part to act as baselines for policy analysis; and Policy simulations, where policy and other structural changes are i...
In this paper I analyze the performance of the Michigan Model of Production and Trade in simulati... more In this paper I analyze the performance of the Michigan Model of Production and Trade in simulating the impact of trade liberalization under the North American Free Trade Agreement, reviewing the results of Brown, Deardorff, and Stern (1992). Because the NAFTA entered into force only part way through the phase-in of the U.S.-Canada FTA accord, I consider the ir joint impact on the pattern of relative trade flows. The methodology draws on the Fox (2000) analysis of the U.S.-Canada FTA. A substantial innovation in this paper is the reimplementation of the model using MPSGE/GAMS. Preliminary results suggest that the model performs best when simulating the impact on the already-substantial trade flows between U.S.-Canada and U.S.-Mexico. The expansion of certain sectors that had little pre-NAFTA trade highlights the difficulty of using a CES specification.
We use the GTAP model together with version 3 (base year 1992) of the GTAP database to simulate t... more We use the GTAP model together with version 3 (base year 1992) of the GTAP database to simulate the removal of tariff and non-tariff barriers between U.S., Canada, and Mexico under NAFTA. Our paper has two objectives. First is to evaluate the predictions made by GTAP against the actual post-NAFTA changes in NAFTA trade. Recent literature (Kehoe, 2005; Shikher, 2012) finds that pre-NAFTA predictions of the effects of NAFTA on trade have little correlation with the actual changes. Therefore, we wanted to investigate whether GTAP could have produced accurate predictions if it were used before NAFTA. The second objective is to compare the predictions of GTAP against the predictions of a general equilibrium model based on the Eaton and Kortum (2002) methodology with heterogeneous producers. We wanted to investigate if the two models would produce different predictions and investigate the sources of these differences. We find that the changes in NAFTA trade predicted by GTAP using pre-NAF...
This paper documents the construction of consistent social accounts that cover the period from 19... more This paper documents the construction of consistent social accounts that cover the period from 1978 to 2001 for the U.S. economy at a two-digit level of aggregation. There are four primary data sources for the construction of the accounts. First, the Bureau of Economic Analysis (BEA) publishes a Gross Domestic Product by Industry (GDPI) series that includes value added by factor and sector (at approximately the two-digit level). The series also includes other useful measures of total intermediate inputs and various double-deflation indices for conversion of current dollar measures into real measures. The second primary data source is the benchmark input-output (BIO) accounts published by the BEA. The input-output accounts allow us to decompose intermediate inputs by two-digit commodity, although they are only available for select years. The third source is the U.S. Department of Commerce (DOC) customs level data on annual merchandise trade (Trade Policy Information Service of the DO...
This paper reviews the ITC experience with policy applications of CGE modeling, including applica... more This paper reviews the ITC experience with policy applications of CGE modeling, including applications of the ITC model and of GTAP. The paper reviews the history and role of CGE modeling at the ITC, starting with the development of the first ITC CGE model and culminating with the current effort to develop the USAGE model with Monash. An overview will be provided on the contribution GE models to policy debates in the US. The paper emphasizes how the modeling work fits into the trade-policy debate in the US, and how the ITCi¦s experience has led it to seek development of a modeling framework that better meets its customers demands, particularly for policy scenario projections and increased analysis of regional and adjustment issues.
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