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

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

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dc.contributor.author Drake, David Francis
dc.date.accessioned 2012-09-04T18:24:45Z
dc.date.issued 2012-09-04
dc.identifier.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 en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:9502856
dc.description.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. en_US
dc.language.iso en_US en_US
dash.license OAP
dc.title Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Comparative Advantage en_US
dc.type Research Paper or Report en_US
dc.description.version Author's Original en_US
dc.relation.journal Harvard Business School working paper series # 13-021 en_US
dash.depositing.author Drake, David Francis
dc.date.available 2012-09-04T18:24:45Z

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