Global Warming and Border Carbon Adjustments

12 Pages Posted: 16 Jan 2020

See all articles by Sungwan Hong

Sungwan Hong

Department of Economics, Pennsylvania State University

Seung-Gyu Sim

Aoyama Gakuin University

Ayako Obashi

Aoyama Gakuin University

Yoshitaka Tsuruta

Aoyama Gakuin University

Date Written: December 27, 2019

Abstract

This study examines the welfare implications of border carbon adjustments (BCAs) in a globalized economy characterized by international trade and cross-border pollution (CBP). The model predicts that adopting BCAs is a weakly dominant strategy and global welfare is maximized when at least one country adopts BCAs in the presence of CBP, such as global warming. This is because adopting BCAs incentivizes other countries to tighten their environmental regulations without concerns such as the excessive shrinkage of domestic production and aggravation of CBP.

Keywords: border carbon adjustment, cross-border pollution, international trade

JEL Classification: H23, L51, Q56

Suggested Citation

Hong, Sungwan and Sim, Seung-Gyu and Obashi, Ayako and Tsuruta, Yoshitaka, Global Warming and Border Carbon Adjustments (December 27, 2019). Available at SSRN: https://ssrn.com/abstract=3510169 or http://dx.doi.org/10.2139/ssrn.3510169

Sungwan Hong

Department of Economics, Pennsylvania State University ( email )

University Park, PA 16802
United States

Seung-Gyu Sim (Contact Author)

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Ayako Obashi

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Yoshitaka Tsuruta

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

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