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Comment by sephamorr | Hacker News Reader

How does this deal with the border-adjustment problem? I used to be a strong supporter of carbon taxation, but ultimately concluded that a good policy (that doesn't have perverse incentive consequences for imports/exports) would be an extremely difficult policy to implement, and beyond the current scope of support for climate policies.

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H.R. 763, as I understand it, puts taxes on imports from countries that have not implemented similar carbon taxes, in an attempt to avoid disadvantaging domestic businesses. Goods exported to other countries will allow a tax refund as well.

So if I understand what you're saying, you're worried that domestic producers will focus more on exports, rather than selling their goods domestically? I think it would tend to shift things in that direction to some degree. Do you feel that that would negate a lot of the benefit of the bill? I feel like there's more to what you're saying that I haven't grokked.

If the border tax is just for countries without a similar tax, let's consider one example, say steel. Foundries in countries that fall under the taxed regime then have an incentive to produce the cheapest (and dirtiest) steel, since they get no benefit vs the other foundries (you could rightly retort though that this is largely the way it is today). Maybe the tax then should try to evaluate the relative carbon intensity of each supplier, rather than just by region/country, but good luck avoiding cheaters around the world. I guess overall I have a hard time imagining that you could create a fair tax/duty for carbon intensive industries that accounted for all of these potentially perverse incentives unique to each industry (just take a look at the US tax code), given how hard it is to write and pass policy without succumbing to special interests.

It sure wouldn't be perfect, but I don't think that's enough reason not to do it.

Hopefully, if we import a lot of steal from a country, our border adjustment would be incentive enough for that country to adopt for themselves this very sensible fee & dividend system, after which each steel maker would actually be taxed the appropriate amount.

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