Free-Riding, Carbon Treaties and Trade Wars: the Role of Domestic Environmental Policies

Lisandro Abrego and Carlo Perroni

CSGR Working papers series from Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick

Abstract: This paper uses a calibrated general-equilibrium model of North-South trade with carbon emissions to explore the strategic, open-economy implications of price and quantity based instruments for CO2 emission reduction. We compute non-cooperative environmental and trade policy equilibria and Nash bargaining outcomes in environmental policies with side payments of cash. Results show that quotas can lead to higher internalization levels in a non- cooperative zero-tariff equilibrium in comparison with emission fees. If tariffs are also chosen non-cooperatively, the form of policy instrument used affects equilibrium tariffs, with quotas leading to lower trade barriers, particularly under a regional carbon treaty.

Keywords: International Free-Riding; Carbon Treaties; Tariff Wars. (search for similar items in EconPapers)
Date: 1998-07
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Journal Article: Free-riding, carbon treaties, and trade wars: the role of domestic environmental policies (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:wck:wckewp:09/98

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