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

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  • ISHIKAWA Jota
  • OKUBO Toshihiro

Abstract

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.

Suggested Citation

  • ISHIKAWA Jota & OKUBO Toshihiro, 2013. "Greenhouse Gas Emission Controls and Firm Locations in North-South Trade," Discussion papers 13045, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13045
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    More about this item

    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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