One of the challenges of constructing a national or regional market-correction scheme to remove the distortions from negative externalities, is that such a scheme is liable to create leakage: for example, a European carbon tax could simply result in the carbon-emitters locating to outside the EU.
The antidote is a border-adjustment scheme, such as (a combination of) import tariffs and export rebates.
Is there empirical evidence on the factors that make a difference between schemes that are more successful, and those that are less successful, in correcting the distortion without exporting the externalities?
