2024-03-21-IMF-Cross-Border_Impacts_of_Climate_Policy_Packages_in_North_America_49页_1mb

Introduction: The paper analyzes cross-border impacts of climate policies in Canada, the U.S. (via the Inflation Reduction Act or IRA), and Mexico. Using the IMF-ENV global computable general equilibrium model, it quantifies competitiveness effects, trade losses, and carbon leakage. Concerns about competitiveness and carbon leakage are addressed through sectoral and aggregate analyses.

Key Findings:

• Canada's Carbon Tax and Subsidies: Domestic policies reduce GHG emissions by 29–35% relative to 2005 levels by 2030, boosting renewable energy use (e.g., 89% green electricity share) but with minimal cross-border spillovers (e.g., negligible carbon leakage).
• U.S. IRA Focus on Green Subsidies: Policies increase clean energy deployment (e.g., 73% green electricity share), lower electricity prices, and stimulate job growth in the U.S., with very limited cross-border effects on GDP or employment.
• Cross-Border Effects: Competitive impacts are primarily confined to energy and energy-intensive trade-exposed (EITE) sectors, with minor changes in market shares. Aggregate effects across countries are almost negligible, but sectoral variations exist (e.g., U.S. gains in electricity exports).
• Carbon Leakage: Estimated at approximately 0.02%, indicating that climate policies in North America do not significantly offset global emissions elsewhere.
• Sectoral Impacts: EITE sectors show heterogeneity (e.g., U.S. gains in iron and steel, but Canada loses market share in chemicals). Subsidies and taxes alter production costs, with little to no substantial irreversible damage to the economy in aggregate.

Conclusion: Cross-border climate policy divergence in North America has very small and limited macroeconomic spillovers, with minimal trade-induced carbon leakage. However, targeted sectors may face adjustments, and policies could catalyze global green technology diffusion. Competitiveness concerns appear overstated, but ongoing monitoring remains crucial.