International Trade in Carbon Emission Rights and Basic Materials: General Equilibrium Calculations for 2020
Restrictions on carbon dioxide emissions affect international trade and the pattern of comparative advantage. This paper, based on calculations with a static general equilibrium model, suggests that international trade in carbon rights is a substitute for trade in energy-intensive goods, and thus international trading in carbon rights reduces sectoral effects of emission reductions. In our model, we surprisingly find that free riding by non-signatory countries may not render unilateral action ineffective. If the OECD unilaterally cuts global emissions by 5 percent from 1990 levels by the year 2020, emissions by non-OECD regions increase but offset less than 15 percent of this cutback. Moreover, carbon taxes depress international oil prices and create incentives for increased trade in natural gas. Copyright 1993 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 95 (1993)
Issue (Month): 3 ()
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