Transcript Paper 33-PPS-Yamazaki

CGE Analysis of Border Tax Adjustments
for Imported/Exported Steel Products
Masato YAMAZAKI
National Institute of Advanced Industrial
Science and Technology, Japan
1
Outline of the Presentation
I. Background of the research
Competitiveness issues, Japanese iron and steel industries, and Border
tax adjustments.
II. Research approach
Computable General Equilibrium model and simulation scenarios
III. Results and Implications
The simulation results and implications of policy scenarios
IV. Concluding Remark
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Background
Emission Trading and Competitiveness Issues
• Japan pledged to reduce domestic CO2 emissions by 25% relative to 1990
levels by 2020 at the UN summit in 2009.
• Japan plans to introduce a nationwide emission trading scheme for CO2.
Emissions trading scheme could causes a drastic increase in the production
costs of Japanese carbon-intensive sectors (e.g. Steel products).
Competitiveness issues
• Unfairness: Carbon-intensive sectors of non- or less CO2 emissionregulated countries would have their competitiveness increased by
Japanese regulations on CO2 emissions.
• Carbon leakage: Increase in the competitiveness of carbon-intensive
sectors in non- or less regulated countries could lead to increase in CO2
emissions in these countries because of increased production.
3
Background
Changes in Volume of Steel Production,
Exports, and Imports in Japan
Source: The Japan Iron and Steel Federation (2009)
4
Background
Trade Partners of Japanese Iron and Steel Products
Share of countries exporting to Japan
in 2008
Share of countries importing from Japan
in 2008
Source:UN comtrade
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Background
The Top 10 Ranking of The World’s Biggest SteelProducing Companies in 2005 and 2008
Source: The Japan Iron and Steel Federation (2009)
Rank
Firm
Share in 2005
Rank
Firm
Share in 2008
1
Mittal Steel (Nederland)
4.41%
1
Arcelor Mittal
(Luxembourg)
7.79%
2
Arcelor (Luxembourg)
4.12%
2
Nippon Steel (Japan)
2.78%
3
Nippon Steel (Japan)
2.91%
3
Baosteel Group (China)
2.67%
4
POSCO (Rep. of Korea)
2.78%
4
POSCO (Rep. of Korea)
2.62%
5
JFE (Japan)
2.61%
5
JFE (Japan)
2.55%
6
Hebei Iron and Steel
Group (China)
Wuhan Steel Group
(China)
6
Baosteel Group (China)
2.01%
7
US Steel (USA)
1.70%
7
8
Nucor (USA)
1.63%
8
Tata Steel (India)
1.84%
9
Corus Group (UK)
1.61%
9
Jiangsu Shagang Group
(China)
1.76%
10
Riva (Italy)
1.55%
10
US Steel (USA)
1.75%
2.51%
2.09%
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Background
What are Border Tax Adjustments ?
The Basic concept of BTAs


Imposition of carbon tariffs on imports from non- or less regulated
countries. In essence, the tax rate is decided on the basis of the
amount of CO2 emitted by the production of imports.
previously paid emission cost rebates on exports to non- or less
regulated countries.
BTAs are government trade measures that could ensure fair competition
between regulated and non- or less regulated countries.
Costs rebates
Carbon tariffs
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Background
The Focuses of This Study
The Impacts of BTAs on
 The production of domestic sectors, Japan’s GDP, and the
price of emission permits.
We also investigate
 The economic implications of BTAs by comparing their effects
with those of sectoral exemptions.
Examinations by using
Computable General Equilibrium (CGE) model.
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Approach
What is a CGE model?
• Mathematical economic simulation model
(a system of non-linear simultaneous equations)
• Based on the General Equilibrium theory in economics
• Used for economic simulations worldwide to assess the
economic impact of climate change and trade policies
• Our model focuses on the Japanese economy
(using the 2005 input-output table for Japan)
• Treats iron and steel sectors in detail.
(capture the differences in production methods and
types of steel products)
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Approach
Simulation Scenarios
The cap on CO2 emissions is set for Japan to attain the target of 25% reduction
in domestic CO2 emissions relative to 1990 levels.
Competitiveness policies
1.Non-competitiveness policies
2.BTAs for imported/exported steel products
3.Exemption for iron and steel sectors
BTAs
Exemption
1
ETS
×
×
2
ETS
○
×
3
ETS
×
○
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Results
The Sectoral Output Impacts of The ETS
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Results
Side effects of competitiveness policies.
Changes in GDP compared to no
reduction case (%)
Prices of the emission permit (JPY)
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Results
Changes in the market shares of imported steel products (%)
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Results
Results and Implications
Mitigation of decrease in iron and steel production
BTAs < Exemptions
Fairness of burden sharing among domestic industries
BTAs > Exemptions
Nationwide economic impacts
BTAs > Exemptions
Protection of market share
BTAs ≒ Exemptions
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Concluding Remark
I.
Although BTAs is less effective than sectoral exemptions in
the mitigation of steel production decreases, it does not lead
to serious unfairness in burden sharing among domestic
industries and serious negative economic impacts compared
to sectoral exemptions.
II. Sectoral exemptions could replace international unfairness
between regulated countries and non- or less regulated
countries with domestic unfairness between exempted
sectors and non-exempted sectors.
III. BTAs are worth considering as an option for ensuring fair
international competition via their domestic economic
impact.
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