External Balance, Dynamic Efficiency, and Welfare Effects of National Climate Policies

Karl Farmer and Matthias Schelnast
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Matthias Schelnast: University of Graz

Chapter 18 in Growth and International Trade, 2021, pp 425-456 from Springer

Abstract: Abstract This chapter investigates the domestic and foreign welfare effects of unilateral and multilateral permit policies in a two-country overlapping generations model with producer carbon emissions. We show that the welfare effects of a more stringent cap on emissions depend on the external balance of the policy-implementing country, the dynamic (in)efficiency of the world economy, and the preference for environmental quality. Under dynamic efficiency, the global welfare loss of policy implementation in the net foreign creditor country is lower than of a policy implementation in the net foreign debtor country. Moreover, although the country which has unilaterally implemented a permit policy would gain from a multilateral policy, the associated welfare loss for the other country is larger than that of a unilateral policy abroad.

Keywords: Climate policy; Welfare effect; Welfare loss; Emission permit; External balance (search for similar items in EconPapers)
Date: 2021
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Chapter: External Balance, Dynamic Efficiency and Welfare Effects of National Climate Policies (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-662-62943-7_18

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DOI: 10.1007/978-3-662-62943-7_18

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