Carbon tariffs and environmental policy: Taxes versus standards

Tsaur‐Chin Wu, Chin-Ho Lin and Chia‐Jen Chang

International Journal of Economic Theory, 2024, vol. 20, issue 3, 269-302

Abstract: This paper compares different environmental policies under free‐trade and carbon tariffs. Our findings are as follows. First, taxes and standards of exporting countries become laxer under carbon tariffs than free trade. Next, if an importing country adopts free trade, its welfare is relatively lower (higher) under taxes when the marginal pollution damage is smaller (greater). Conversely, if an importing country implements a carbon tariff policy, its welfare is relatively higher under taxes. Last, the importing country's free‐trade (carbon tariff) policy leads the exporting country to have lower (higher) welfare under taxes than standards.

Date: 2024
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