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Environmental Management Policy under International Carbon Leakage

  • Kazuharu Kiyono
  • Jota Ishikawa

This paper studies environmental management policy when two fossil-fuel-consuming countries non-cooperatively regulate greenhouse-gas emissions through emission taxes or quotas. The presence of carbon leakage caused by fuel-price changes affects the tax-quota equivalence. We explore each country's incentive to choose an environment regulation instrument within a framework of a two-stage policy choice game and find subgame-perfect Nash equilibria. This sheds a new light on the question of why adopted policy instruments could be different among countries. We also analyze the welfare effect of creating an international market for emission permits. International trade in emission permits may not benefit the fuel-consuming countries.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd11-204.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd11-204.

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Date of creation: Sep 2011
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Handle: RePEc:hst:ghsdps:gd11-204
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  1. Jota Ishikawa & Kazuharu Kiyono & Morihiro Yomogida, 2011. "Is Emission Trading Beneficial?," Global COE Hi-Stat Discussion Paper Series gd10-180, Institute of Economic Research, Hitotsubashi University.
  2. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2000. "Carbon Emission Leakages: A General Equilibrium View," OECD Economics Department Working Papers 242, OECD Publishing.
  3. Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Global COE Hi-Stat Discussion Paper Series gd08-013, Institute of Economic Research, Hitotsubashi University.
  4. Copeland,B.R. & Taylor,M.S., 2000. "Free trade and global warming : a trade theory view of the Kyoto protocol," Working papers 4, Wisconsin Madison - Social Systems.
  5. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1991. "Environmental Policy When Market Structure and Plant Locations are Endo-genous," NBER Working Papers 3671, National Bureau of Economic Research, Inc.
  6. Jota Ishikawa & Kazuharu Kiyono, 2006. "Greenhouse-Gas Emission Controls In An Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 431-450, 05.
  7. Christoph Böhringer & Andreas Lange & Thomas F. Rutherford, 2010. "Optimal Emission Pricing in the Presence of International Spillovers: Decomposing Leakage and Terms-of-Trade Motives," NBER Working Papers 15899, National Bureau of Economic Research, Inc.
  8. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
  9. Alistair fnUlph, 1996. "Environmental policy instruments and imperfectly competitive international trade," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 7(4), pages 333-355, June.
  10. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
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