Global Carbon Trade and Local Externalities

Reto Schleiniger

Swiss Journal of Economics and Statistics (SJES), 2004, vol. 140, issue II, 245-264

Abstract: The burning of fossil fuels not only causes CO2 emissions but at the same time impairs local environmental condition such as ambient air quality. The present paper analyzes the distortion arising from international trade in carbon permits when local externalities persist. It is derived that the distortion is determined by the difference in factor endowment and population density of the trading regions. Moreover, an empirical illustration for Switzerland shows that a rich country buying emission rights sustains a welfare loss.

Keywords: International CO2 policy; emission trading; second-best analysis (search for similar items in EconPapers)
JEL-codes: D62 H21 Q40 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2004-ii-4

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