RFF Report, Policy Guidance for US GHG Tax Legislation and Regulation: Border Tax Adjustments for Products of Energy-Intensive, Trade-Exposed and Other Industries

This report describes how border adjustments set up around a greenhouse gas tax and an appropriately designed greenhouse gas index can be framed in a fashion analogous to value added taxes (VAT) that are allowed under WTO rules.

Because many nations participate in trade of GHG-intensive products with the United States, implementing border tax adjustments (BTAs) will require a significant, ongoing administrative effort. A key administrative challenge will be to allocate emissions from facilities to the GHG-intensive products they produce. This report describes procedures, based on a proposed GHG-index (GGI), to determine BTAs compatible with World Trade Organization (WTO) obligations.