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Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization

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  • Jota Ishikawa
  • Toshihiro Okubo

Abstract

This paper studies greenhouse-gas (GHG) emission controls in the presence of carbon leakage through international firm relocation. The Kyoto Protocol requires developed countries to reduce GHG emissions by a certain amount. Comparing emission quotas with emission taxes, we show that taxes coupled with lower trade costs facilitate more firm relocations than quotas do, causing more international carbon leakage. Thus, if a country is concerned about global emissions, emission quotas would be adopted to mitigate the carbon leakage. Firm relocation entails a trade-off between trade liberalization and emission regulations. Emission regulations may be hampered by trade liberalization, and vice versa.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-013.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-013.

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Date of creation: Nov 2008
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Handle: RePEc:hst:ghsdps:gd08-013

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Keywords: trade liberalization; global warming; Kyoto Protocol; emission tax; emission quota; carbon leakage;

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Citations

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Cited by:
  1. Kazuharu Kiyono & Jota Ishikawa, 2011. "Environmental Management Policy under International Carbon Leakage," Global COE Hi-Stat Discussion Paper Series gd11-204, Institute of Economic Research, Hitotsubashi University.
  2. Ishikawa, Jota & Okubo, Toshihiro, 2010. "Environmental Standards under International Oligopoly," CCES Discussion Paper Series 32, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  3. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, 08.
  4. Copeland, Brian R., 2012. "International trade and green growth," Policy Research Working Paper Series 6235, The World Bank.
  5. John Feddersen, 2012. "Why we can't confirm the pollution haven hypothesis: A model of carbon leakage with agglomeration," Economics Series Working Papers 613, University of Oxford, Department of Economics.
  6. Forslid, Rikard & Okubo, Toshihiro & Sanctuary, Mark, 2013. "Trade, Transboundary Pollution and Market Size," Research Papers in Economics 2013:8, Stockholm University, Department of Economics.

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