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

Listed author(s):
  • ISHIKAWA Jota
  • OKUBO Toshihiro

This paper studies greenhouse gas (GHG) emission controls in the presence of international carbon leakage through international firm relocation. In a trade and geography framework with two countries ("North" and "South"), only North sets a target for GHG emissions. We compare the consequences of emission quotas, emission taxes, and emission standards under trade liberalization for the location of pollution-intensive and less pollution-intensive sectors and the degree of carbon leakage. With low trade costs, further trade liberalization increases global emissions by facilitating carbon leakage. Regulation by quotas leads to spatial sorting with less carbon leakage and less global emissions than regulation by taxes and standards.

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File URL: http://www.rieti.go.jp/jp/publications/dp/13e045.pdf
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13045.

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Length: 41 pages
Date of creation: May 2013
Handle: RePEc:eti:dpaper:13045
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