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

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  • Schenker, Oliver
  • Koesler, Simon
  • Löschel, Andreas

Abstract

In the last decades supply chains emerged that stretch across many countries. This has been explained with decreasing trade and communication costs. We extend the literature by analyzing if and how unilateral environmental regulation induces offshoring to unregulated jurisdictions. We first apply an analytical partial-equilibrium model of a two-stage production process that can be distributed between two countries and investigate unilateral emission pricing and its supplementation with border carbon taxes. To get a more comprehensive picture, we subsequently apply a computable general equilibrium model that includes a better 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 specialisation of European industries and explain these differences by heterogeneity in the emission-intensity and pre-policy vertical specialisation of sectors. Border taxes are successful in protecting upstream industries, but with negative side effects for downstream industries.

Suggested Citation

  • Schenker, Oliver & Koesler, Simon & Löschel, Andreas, 2014. "On the effects of unilateral environmental policy on offshoring in multi-stage production processes," MEP Discussion Papers 77, University of Münster, Münster Center for Economic Policy (MEP).
  • Handle: RePEc:zbw:cawmdp:77
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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 & 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.
    3. Baccianti, Claudio, 2021. "Essays in economic growth and climate policy," Other publications TiSEM e5415454-40c2-4154-991e-6, Tilburg University, School of Economics and Management.
    4. 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).
    5. Kaltenegger, Oliver, 2020. "What drives total real unit energy costs globally? A novel LMDI decomposition approach," Applied Energy, Elsevier, vol. 261(C).
    6. Kaltenegger, Oliver, 2019. "What drives total real unit energy costs globally? A novel LMDI decomposition approach," MEP Discussion Papers 110, University of Münster, Münster Center for Economic Policy (MEP).
    7. 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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    More about this item

    Keywords

    Unilateral Climate Policy; Border Carbon Taxes; Vertical Specialisation; Offshoring; Outsourcing; Computable General Equilibrium;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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