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?

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    $\begingroup$ I don't have an answer to this, but it's another in a sequence of great questions you have asked about applying economics to environmental issues. $\endgroup$
    – Ubiquitous
    Nov 23, 2014 at 10:29


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