Global Carbon Taxation: Analyzing Pollution Effects When Mobile Firms Trade

Nelly Exbrayat (), Stéphane Riou () and Skerdilajda Zanaj
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Nelly Exbrayat: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique
Stéphane Riou: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique
Skerdilajda Zanaj: CREA - Center for Research in Economic Analysis - uni.lu - Université du Luxembourg = University of Luxembourg = Universität Luxemburg

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Abstract: ABSTRACT This paper examines the implications of a global carbon tax within a framework that includes asymmetrically sized countries, imperfectly competitive markets, and mobile, heterogeneous firms engaged in international trade. In the short run, the tax primarily produces Pigouvian effects—raising prices, reducing production, and lowering emissions, which aligns with established literature. In the long run, the mobility of firms introduces additional effects, influenced by trade intensity. Specifically, the tax acts as a dispersion force, encouraging firms to relocate to smaller markets to minimize tax burdens, thus revealing its spatial non‐neutrality across varying market sizes. High trade costs exacerbate this effect, potentially eliminating the most environmentally favorable locations. From a welfare perspective, the tension between consumer surplus and emissions can be mitigated if consumers are environmentally conscious and green policies are complemented by trade policies.

Keywords: firm location; global carbon tax; heterogeneous firms; international trade (search for similar items in EconPapers)
Date: 2025-08-07
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Published in Journal of Public Economic Theory, 2025, 27 (4), ⟨10.1111/jpet.70051⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05444919

DOI: 10.1111/jpet.70051

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