Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage

DSpace/Manakin Repository

Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage

Citable link to this page

. . . . . .

Title: Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage
Author: Drake, David Francis
Citation: Drake, David F. "Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage." Harvard Business School Working Paper, No. 13-021, August 2012
Full Text & Related Files:
Abstract: Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions and increase global emissions in the process. Carbon tariffs have emerged as a possible mechanism to address these concerns by imposing carbon costs on imports at the regulated region's border. I show that, when firms choose from discrete production technologies and offshore producers hold a comparative cost advantage, carbon leakage can result despite the implementation of a carbon tariff. In such a setting, foreign firms adopt clean technology at a lower emissions price than firms operating in the regulated region, with foreign entry increasing only over emissions price intervals within which foreign firms hold this technology advantage. Further, domestic firms are shown to conditionally offshore production despite the implementation of a carbon tariff, adopting cleaner technology when they do so. As a consequence, when carbon leakage does occur under a carbon tariff, it conditionally decreases global emissions. Three sources of potential welfare improvement realized through carbon tariffs require both foreign comparative advantage and endogenous technology choice, underscoring the importance of considering both in value assessments of such a policy.
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:9502856

Show full Dublin Core record

This item appears in the following Collection(s)

 
 

Search DASH


Advanced Search
 
 

Submitters