Impacts of emission reduction policies in a multi-regional multi-sectoral small open economy with endogenous growth
AbstractThe burden sharing of pollution abatement costs raises the issue of how to share the costs between entities (country, region or industry) and how the pollution permits should be distributed between the parties involved. This paper explores this issue in the framework of a dynamic endogenous growth 2 sectors - 2 regions - 2 inputs Heckscher-Ohlin model of a small open multi-regional economy with an international tradable permits market. Give an “emission-based grand-fathering” sharing rule, capital accumulation is more negatively affected by the environmental policy in the energy intensive sector. We show that such a property does not necessarily hold with a “production-based grand-fathering” sharing rule. We also show that the impact on capital is likely to translate into the sectoral added value level after some time, specially if the economy is submitted to an increasingly constraining environmental policy driving up the ratio price of permits to price of energy. Finally, we show that the impact of environmental policy at the regional level depends crucially on the specialization of the region along the baseline.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007010.
Date of creation: 01 Mar 2007
Date of revision:
Pollution permits; Grand-fathering; Sectoral spillovers; Multi-regional economy; Endogenous growth;
Other versions of this item:
- BOUCEKKINE, Raouf & GERMAIN, Marc, 2007. "Impacts of emission reduction policies in a multi-regional multi-sectoral small open economy with endogenous growth," CORE Discussion Papers 2007011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-31 (All new papers)
- NEP-ENE-2007-03-31 (Energy Economics)
- NEP-ENV-2007-03-31 (Environmental Economics)
- NEP-MAC-2007-03-31 (Macroeconomics)
- NEP-REG-2007-03-31 (Regulation)
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