Carbon leakage in a small open economy: The importance of international climate policies

Ulrik R. Beck, Peter K. Kruse-Andersen and Louis B. Stewart

Energy Economics, 2023, vol. 117, issue C

Abstract: A substantial literature investigates carbon leakage effects for large countries and climate coalitions. However, little is known about leakage effects for a small open economy within a climate coalition. To fill this gap in the literature, we incorporate international climate policies relevant for a small open EU economy into the general equilibrium model GTAP-E. We focus our analysis on Denmark, but we show that our framework can be applied to any EU economy. We find substantial leakage associated with an economy-wide CO2e tax. This result is strongly affected by EU climate policies. We also present sector-specific leakage rates and find large sectoral differences.

Keywords: Carbon leakage; Trade and the environment; Climate policy; Computable general equilibrium (search for similar items in EconPapers)
JEL-codes: F18 H23 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:117:y:2023:i:c:s014098832200576x

DOI: 10.1016/j.eneco.2022.106447

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