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On the effects of unilateral environmental policy on offshoring in multi‐stage production processes

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  • Oliver Schenker
  • Simon Koesler
  • Andreas Löschel

Abstract

We extend the literature on global supply chains by analyzing if and how unilateral environmental regulation induces offshoring. We develop an analytical model of two‐stage production processes that can be distributed between two countries and investigate unilateral emission pricing and its supplementation with border carbon taxes. In contrast to existing final good models, we are able to show how impacts of regulation differ across the different stages of the supply chain, depending on the interplay of comparative advantages and general equilibrium effects. To get a more comprehensive picture, we subsequently apply a computable general equilibrium model that includes a representation of international supply chains. We find heterogeneous but mostly positive effects of a unilateral carbon emission reduction by the European Union on the degree of vertical specialization of European industries. Border taxes are successful in protecting upstream industries, but with negative side effects for downstream industries. À propos des effets d’une politique environnementale unilatérale sur la délocalisation dans des processus de production à plusieurs étapes. Les auteurs développent une extension de la littérature spécialisée sur les chaînes logistiques globales en analysant si et comment une réglementation environnementale unilatérale induit la délocalisation. Ils développent un modèle analytique du processus de production à deux étapes qui peut se répartir sur deux pays. On examine l’introduction unilatérale d’une tarification sur les émissions à laquelle s’ajoutent des taxes sur le carbone aux frontières. Contrairement à ce qui se passe dans un modèle de produits finaux, on montre comment les impacts de la réglementation diffèrent d’un stage à l’autre dans la chaîne logistique selon la nature des interactions entre les avantages comparatifs et les effets d’équilibre général. Pour se donner un portrait plus complet, on utilise un modèle d’équilibre général calculable qui inclut une représentation de la chaîne logistique internationale. On découvre des effets hétérogènes mais surtout positifs d’une réduction unilatérale des émissions de carbone par l’Union européenne sur le degré de spécialisation verticale des industries européennes. Des taxes aux frontières réussissent à protéger les industries en amont, mais avec des effets négatifs collatéraux pour les industries en aval.

Suggested Citation

  • Oliver Schenker & Simon Koesler & Andreas Löschel, 2018. "On the effects of unilateral environmental policy on offshoring in multi‐stage production processes," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1221-1256, November.
  • Handle: RePEc:wly:canjec:v:51:y:2018:i:4:p:1221-1256
    DOI: 10.1111/caje.12354
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    Cited by:

    1. Ward, Hauke & Radebach, Alexander & Vierhaus, Ingmar & Fügenschuh, Armin & Steckel, Jan Christoph, 2017. "Reducing global CO2 emissions with the technologies we have," Resource and Energy Economics, Elsevier, vol. 49(C), pages 201-217.
    2. Kaltenegger, Oliver, 2020. "What drives total real unit energy costs globally? A novel LMDI decomposition approach," Applied Energy, Elsevier, vol. 261(C).
    3. Kaltenegger, Oliver & Löschel, Andreas & Pothen, Frank, 2017. "The effect of globalisation on energy footprints: Disentangling the links of global value chains," Energy Economics, Elsevier, vol. 68(S1), pages 148-168.
    4. Kaltenegger, Oliver, 2019. "What drives total real unit energy costs globally? A novel LMDI decomposition approach," CAWM Discussion Papers 110, University of Münster, Center of Applied Economic Research Münster (CAWM).
    5. Zhang, Danyang & Wang, Hui & Löschel, Andreas & Zhou, Peng, 2021. "The changing role of global value chains in CO2 emission intensity in 2000–2014," Energy Economics, Elsevier, vol. 93(C).
    6. Fang, Yuan & Yu, Yugang & Shi, Ye & Liu, Jie, 2020. "The effect of carbon tariffs on global emission control: A global supply chain model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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