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Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade

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  • Jota Ishikawa

    (Hitotsubashi University
    RIETI)

  • Toshihiro Okubo

    (Keio University)

Abstract

This paper studies greenhouse-gas emission (GHG) controls in the presence of international carbon leakage through international firm relocation. In a new economic geography model with two countries (‘North’ and ‘South’), only North sets a target for GHG emissions. We compare the consequences of emission quotas and emission taxes under trade liberalization on location of two manufacturing sectors with different emission intensities and degrees of carbon leakage. With low trade costs, further trade liberalization increases global emissions by facilitating carbon leakage. Regulation by quotas leads to spatial sorting, resulting in less carbon leakage and less global emissions than regulation by taxes.

Suggested Citation

  • Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    • Handle: RePEc:kap:enreec:v:67:y:2017:i:4:d:10.1007_s10640-015-9991-0
    DOI: 10.1007/s10640-015-9991-0
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    More about this item

    Keywords

    Global warming; Emission tax; Emission quota; Carbon leakage; Firm relocation; Trade liberalization;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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