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The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies

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  • Boucekkine Raouf

    (Université Catholique de Louvain)

  • Germain Marc

    (Université Catholique de Louvain)

Abstract

The burden sharing of pollution abatement costs raises the issue of how the costs are supported by entities (regions or industries) of a country that decides to reduce pollution, e.g., in the Kyoto Protocol context. This paper explores this issue in the framework of a dynamic endogenous growth 2 sectors - 2 regions - 2 inputs Heckscher-Ohlin model of a small open economy with an international tradable permits market. Given an "emission-based grand-fathering" sharing rule, capital accumulation is more negatively affected by the environmental policy in the energy intensive sector if energy and capital are complementary. But the picture could be different in terms of total sectoral revenue, depending on the evolution of prices. Finally, we show that the impact of environmental policy at the regional level depends crucially on the evolution of regional specialization patterns.

Suggested Citation

  • Boucekkine Raouf & Germain Marc, 2009. "The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-34, June.
    • Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:21
    DOI: 10.2202/1935-1690.1692
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    1. Boucekkine, Raouf & Krawczyk, Jacek B. & Vallée, Thomas, 2010. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1813-1835, September.
    2. Dissou, Yazid, 2013. "Regional Burden Sharing of Carbon Mitigation Cost and Output-Based Allocation of Emissions," Conference papers 332342, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Chen, Anping & Groenewold, Nicolaas, 2015. "Emission reduction policy: A regional economic analysis for China," Economic Modelling, Elsevier, vol. 51(C), pages 136-152.
    4. Arif, Faisal & Dissou, Yazid, 2016. "Regional burden sharing of GHG mitigation policies in a decentralized federation," Economic Modelling, Elsevier, vol. 52(PB), pages 390-399.
    5. Anping Chen & Nicolaas Groenewold, 2014. "The regional economic effects of a reduction in carbon emissions and an evaluation of offsetting policies in China," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 429-453, June.
    6. Anping Chen & Nicolaas Groenewold & Alfred J. Hagger, 2013. "The regional economic effects of a reduction in carbon emissions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 483-500, October.
    7. Anping Chen & Nicolaas Groenewold, 2013. "Regional Effects in China of an Emissions-Reduction Policy: Tax v. Subsidy," ERSA conference papers ersa13p1275, European Regional Science Association.

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