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Subglobal Carbon Policy and the Competitive Selection of Heterogeneous Firms

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  • Edward J. Balistreri

    ()
    (Division of Economics and Business, Colorado School of Mines)

  • Thomas F. Rutherford

    ()
    (University of Wisconsin)

Abstract

We analyze subglobal action to mitigate climate change with a consideration of recent advances in the theory of international trade. Subglobal action impacts emissions in unconstrained countries (carbon leakage) through international trade channels. Consequently, estimates of the efficacy of subglobal action, tariffs on embodied carbon, and the distribution of policy costs will be sensitive to the assumed structure of international trade. While most climate-policy models rely on an Armington (1969) structure of international trade, recent empirical evidence supports a new theory suggested by Melitz (2003). We find significant quantitative and qualitative differences when we consider the Melitz trade structure. These differences are important as an alternative, and arguably more plausible, representation of how trade and border adjustments interact with climate policy.

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File URL: http://econbus.mines.edu/working-papers/wp201201.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Colorado School of Mines, Division of Economics and Business in its series Working Papers with number 2012-01.

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Length: 29 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:mns:wpaper:wp201201

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Cited by:
  1. Guy Meunier & Jean-Pierre Ponssard, 2013. "Capacity decisions with demand fluctuations and carbon leakage," Working Papers hal-00347650, HAL.
  2. Schinko, Thomas & Bednar-Friedl, Birgit & Steininger, Karl W. & Grossmann, Wolf D., 2014. "Switching to carbon-free production processes: Implications for carbon leakage and border carbon adjustment," Energy Policy, Elsevier, vol. 67(C), pages 818-831.
  3. Christoph Böhringer & André Müller & Jan Schneider, 2014. "Carbon Tariffs Revisited," CESifo Working Paper Series 4720, CESifo Group Munich.
  4. Hübler, Michael & Pothen, Frank, 2013. "The optimal tariff in the presence of trade-induced productivity gains," ZEW Discussion Papers 13-103, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Branger, Frédéric & Quirion, Philippe, 2014. "Would border carbon adjustments prevent carbon leakage and heavy industry competitiveness losses? Insights from a meta-analysis of recent economic studies," Ecological Economics, Elsevier, vol. 99(C), pages 29-39.
  6. Christoph Böhringer & Andre Müller & Jan Schneider, 2014. "Carbon Tariffs Revisited," ZenTra Working Papers in Transnational Studies 33 / 2014, ZenTra - Center for Transnational Studies, revised Feb 2014.
  7. Michael Hübler & Frank Pothen, 2014. "The Optimal Tariff in the Presence of Trade-Induced Productivity Gains," EcoMod2014 6712, EcoMod.

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