Can a unilateral carbon tax reduce emissions elsewhere?
AbstractOne country or sector that tries to reduce greenhouse gas emissions may fear that other countries or sectors will get a competitive advantage and increase emissions. Computable general equilibrium (CGE) models such as Elliott et al. (2010a, 2010b) indicate that 15–25% of abatement might be offset by this “leakage.” Yet the Fullerton et al. (2012) simple two-sector analytical general equilibrium model shows an offsetting term with negative leakage. In this paper, we use a full CGE model with many countries and many goods to measure effects in a way that allows for this negative leakage term. We vary elasticities of substitution and confirm the analytical model's prediction that whether this negative leakage term offsets the positive leakage terms depends on the ability of consumers to substitute into the untaxed good relative to the ability of firms to substitute from carbon emissions into labor or capital.
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Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 36 (2014)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/505569
Climate policy; Greenhouse gas emissions; Leakage; Abatement resource effect; Terms of trade effect;
Other versions of this item:
- Joshua Elliott & Don Fullerton, 2013. "Can a Unilateral Carbon Tax Reduce Emissions Elsewhere?," NBER Working Papers 18897, National Bureau of Economic Research, Inc.
- Joshua Elliott & Don Fullerton, 2013. "Can a Unilateral Carbon Tax Reduce Emissions Elsewhere?," CESifo Working Paper Series 4113, CESifo Group Munich.
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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