Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

We quantify cross-border effects of the recent climate mitigation policies introduced in Canada and the U.S., using the global general equilibrium model IMF-ENV. Notably, with the substantial emission reductions from Canada’s carbon tax-led mitigation policies and the U.S.’ Inflation Reduction Act, these two countries would bridge two-thirds of the gap toward their Nationally Determined Contribution (NDC) goals. While the broadly divergent policies are believed to elicit competitiveness concerns, we find the aggregate cross-border effects within North America to be very limited and restricted to the energy intensive and trade exposed industries. Potential carbon leakages are also found to be negligible. A more meaningful difference triggered by policy heterogeneity is rather domestic, especially with U.S. subsidies increasing energy output while the Canada model with a carbon tax would marginally decrease it. This analysis is complemented by a stylized model illustrating how such divergence can affect the terms of trade, but also how these effects can be countered by exchange rate flexibility, border adjustments or domestic taxation.

Carbon tax --- Climate policy --- Climate --- Commodities --- Currency crises --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Electric Utilities --- Electric utilities --- Electricity --- Emissions trading --- Energy and the Macroeconomy --- Energy: Government Policy --- Environment --- Environmental Economics --- Environmental economics --- Environmental Economics: Government Policy --- Environmental impact charges --- Environmental policy & protocols --- Environmental Policy --- Environmental policy --- Environmental Taxes and Subsidies --- Financial Markets and the Macroeconomy --- Global Warming --- Informal sector --- International finance --- Investment & securities --- Investments: Energy --- Macroeconomics --- Mathematical Methods and Programming: General --- Natural Disasters and Their Management --- Public finance & taxation --- Redistributive Effects --- Taxation and Subsidies: Externalities --- Taxation --- Taxation, Subsidies, and Revenue: General --- Taxes --- Trade and Environment