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

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Author Info

  • Jota Ishikawa

    (Hitotsubashi University (Japan) and RIETI (Japan))

  • Toshihiro Okubo

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

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://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp231.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 231.

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Length: 39 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:kob:dpaper:231

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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. 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.
  2. 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.
  3. 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.
  4. Copeland, Brian R., 2012. "International trade and green growth," Policy Research Working Paper Series 6235, The World Bank.
  5. Forslid, Rikard & Okubo, Toshihiro & Sanctuary, Mark, 2013. "Trade, Transboundary Pollution and Market Size," CEPR Discussion Papers 9412, C.E.P.R. Discussion Papers.
  6. 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.

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