Global Warming and Border Carbon Adjustments
12 Pages Posted: 16 Jan 2020
Date Written: December 27, 2019
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: Suggested Citation