Global Warming and Border Carbon Adjustments

Hong Sungwan, Sim Seung-Gyu, Ayako Obashi () and Tsuruta Yoshitaka
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Hong Sungwan: Department of Economics, Pennsylvania State University, University Park, PA 16802, USA
Sim Seung-Gyu: Aoyama Gakuin University, 4-4-25 Shibuya, Shibuya-ku, Tokyo 150-8366, Japan
Tsuruta Yoshitaka: Aoyama Gakuin University, 4-4-25 Shibuya, Shibuya-ku, Tokyo 150-8366, Japan

Asian Journal of Law and Economics, 2022, vol. 13, issue 2, 195-208

Abstract: This study examines the welfare implications of allowing border carbon adjustments (BCAs) in a globalized economy characterized by international trade and cross-border pollution (CBP). The model predicts that adopting BCAs is a weakly dominant strategy and global welfare is maximized when at least one country adopts BCAs in the presence of CBP, such as global warming. This is because adopting BCAs induces other countries to raise their domestic emission tax rates without concerns such as the excessive shrinkage of domestic production and aggravation of CBP.

Keywords: border carbon adjustment; international trade; cross-border pollution (search for similar items in EconPapers)
JEL-codes: H23 L51 Q56 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/ajle-2022-0033

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