On interactions of optimal climate policy and international trade. An assessment of border carbon measures
Not only after the failure of the Copenhagen climate conference 2009, border carbon adjustment (BCA) has received growing attention in the climate policy debate as a measure to combat "carbon leakage" and force non-abating countries to tighter climate policies. In this paper, we study the strategic interactions between international trade and climate policy with a focus on the effectiveness of border measures. First, we analyze the main principles of unilateral climate policy with international trade in a small analytical model. Second, we examine welfare effects of WTO compatible carbon import tariffs in a stylized numerical integrated assessment model with explicit trade in commodities and analyze if BCA is a credible threat to force non-abating countries to implement stricter climate policies. We show that the terms of trade effects can, depending on trade patterns, ease or boost the prisoners dilemma of mitigating greenhouse gases. We further demonstrate that WTO conform BCA increases the effectiveness of climate policy and forces trading partners to reduce emissions. But as the results of the numerical model illustrate, welfare effects are depended on trade flows and are negative for realistic parameter values.
|Date of creation:||22 Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bohringer, Christoph & Loschel, Andreas & Rutherford, Thomas F., 2007. "Decomposing the integrated assessment of climate change," Journal of Economic Dynamics and Control, Elsevier, vol. 31(2), pages 683-702, February.
- Schenker, Oliver, 2010. "Transporting goods and damages. The role of trade on the distribution of climate change costs," MPRA Paper 25350, University Library of Munich, Germany.
- Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
- Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
- Mustafa H. Babiker & Thomas F. Rutherford, 2005. "The Economic Effects of Border Measures in Subglobal Climate Agreements," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 99-126.
- Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
- Löschel, Andreas & Alexeeva-Talebi, Victoria & Mennel, Tim, 2008. "Climate Policy and the Problem of Competitiveness: Border Tax Adjustments or Integrated Emission Trading?," ZEW Discussion Papers 08-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- J. Bhagwati & T. N. Srinivasan, 1972.
"The General Equilibrium Theory of Effective Protection and Resource Allocation,"
91, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bhagwati, Jagdish N. & Srinivasan, T. N., 1973. "The general equilibrium theory of effective protection and resource allocation," Journal of International Economics, Elsevier, vol. 3(3), pages 259-281, August.
- Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
- Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November.
- Krutilla, Kerry, 1991. "Environmental regulation in an open economy," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 127-142, March.
- Baumol, William J & Bradford, David F, 1972. "Detrimental Externalities and Non-Convexity of the Production Set," Economica, London School of Economics and Political Science, vol. 39(154), pages 160-76, May.
- Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
- Lessmann, Kai & Marschinski, Robert & Edenhofer, Ottmar, 2009. "The effects of tariffs on coalition formation in a dynamic global warming game," Economic Modelling, Elsevier, vol. 26(3), pages 641-649, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:25820. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.