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Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization

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  • Jota Ishikawa
  • Toshihiro Okubo

Abstract

This paper studies greenhouse-gas (GHG) emission controls in the presence of carbon leakage through international firm relocation. The Kyoto Protocol requires developed countries to reduce GHG emissions by a certain amount. Comparing emission quotas with emission taxes, we show that taxes coupled with lower trade costs facilitate more firm relocations than quotas do, causing more international carbon leakage. Thus, if a country is concerned about global emissions, emission quotas would be adopted to mitigate the carbon leakage. Firm relocation entails a trade-off between trade liberalization and emission regulations. Emission regulations may be hampered by trade liberalization, and vice versa.

Suggested Citation

  • Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Global COE Hi-Stat Discussion Paper Series gd08-013, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd08-013
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    References listed on IDEAS

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    Cited by:

    1. Jacob Wood & Gohar Feroz Khan, 2015. "International trade negotiation analysis: network and semantic knowledge infrastructure," Scientometrics, Springer;Akadémiai Kiadó, vol. 105(1), pages 537-556, October.
    2. John Feddersen, 2012. "Why we can't confirm the pollution haven hypothesis: A model of carbon leakage with agglomeration," Economics Series Working Papers 613, University of Oxford, Department of Economics.
    3. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, August.
    4. Copeland, Brian R., 2012. "International trade and green growth," Policy Research Working Paper Series 6235, The World Bank.
    5. Forslid, Rikard & Okubo, Toshihiro & Sanctuary, Mark, 2013. "Trade, Transboundary Pollution and Market Size," CEPR Discussion Papers 9412, C.E.P.R. Discussion Papers.
    6. Özge Demiral & Mehmet Demiral & Emine Dilara Aktekin‐Gök, 2022. "Extra‐regional trade and consumption‐based carbon dioxide emissions in the European countries: Is there a carbon leakage?," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1987-2001, December.
    7. Cheng, Haitao, 2021. "Trade, Consumption Pollution and Tax," Discussion paper series HIAS-E-106, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    8. Kazuharu Kiyono & Jota Ishikawa, 2013. "Environmental Management Policy Under International Carbon Leakage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 1057-1083, August.
    9. Rikard Forslid & Toshihiro Okubo & Mark Sanctuary, 2017. "Trade Liberalization, Transboundary Pollution, and Market Size," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(3), pages 927-957.
    10. Eichner, Thomas & Pethig, Rüdiger, 2015. "Unilateral consumption-based carbon taxes and negative leakage," Resource and Energy Economics, Elsevier, vol. 40(C), pages 127-142.
    11. ISHIKAWA Jota & OKUBO Toshihiro, 2010. "Environmental Standards under International Oligopoly," Discussion papers 10018, Research Institute of Economy, Trade and Industry (RIETI).
    12. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    13. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    14. TAKATSUKA Hajime & NAKAMURA Ryohei, 2010. "Emission Credit Trading and Regional Inequalities," Discussion papers 10062, Research Institute of Economy, Trade and Industry (RIETI).
    15. Jinhao Liu & Toshiyuki Fujita, 2018. "Trade, cluster and environmental product standard," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(3), pages 655-679, July.

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    More about this item

    Keywords

    trade liberalization; global warming; Kyoto Protocol; emission tax; emission quota; carbon leakage;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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