Applied Economic Perspectives and Policy, DOI: 10.1093/aepp/ppw019.
In this paper, the impact of border measures for climate policy on carbon leakage, and competitiveness of US aluminum producers is analyzed. An appropriate border measure is shown to depend on competition in aluminum production, as well as the basis for assessing trade neutrality of a border measure. If neutrality is based on market volume, carbon leakage is prevented, but competitiveness cannot be maintained. If neutrality is based on market share, competitiveness can be maintained and there is negative carbon leakage. In either case, users of aluminum incur deadweight losses from the combination of climate policy and border measures.