D E P E

As the federal government weighs policy options for reducing greenhouse gases, the question arises as to how to treat imported goods from countries with less stringent emission targets. One policy option is to impose a “carbon tariff ” on imported goods from those countries. The imposition of such a border adjustment, however, would have serious drawbacks. The largest share of the burden of any Canadian trade action would be imposed on US imports, not developing countries. An extra cost imposed on imports would ripple through the economy, and onto final consumers, and would put Canadian firms at a cost disadvantage in foreign markets. The author would like to thank Roland Ismer for his helpful discussions of early versions of this work and Finn Poschmann, Alex Laurin, Aaron Cosbey, Richard Morgenstern, and especially Colin Busby for helpful comments. Thanks also to Nic Rivers for providing research results that were used in the analysis. The author assumes all responsibility for this paper. 1 See Hufbauer (1996) or Orzechowski (2001) for a comprehensive review of border-tax adjustments (BTAs). The failure of the United Nations Climate Change Conference in Copenhagen to reach a binding global agreement to reduce greenhouse gases (GHGs) raises the prospect of a world with fragmented nationa