Is Emission Trading Beneficial?

Author Name ISHIKAWA Jota  (Faculty Fellow, RIETI / Hitotsubashi University) /KIYONO Kazuharu  (Waseda University) /YOMOGIDA Morihiro  (Sophia University)
Creation Date/NO. February 2011 11-E-006
Research Project Theoretical Examination of Climate Change Policy under Open Economies
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We develop a two-country (North and South), two-good, general equilibrium model of international trade in goods and explore the effects of domestic and international emission trading under free trade in goods. Whereas domestic emission trading in North may result in carbon leakage by expanding South's production of the emission-intensive good, international emission trading may induce North to expand the production of the emission-intensive good by importing emission permits. Emission trading may deteriorate global environment. North's (South's) emission trading may not benefit South (North). International emission trading improves global efficiency but may not benefit both countries.

Published: Jota Ishikawa, Kazuharu Kiyono and Morihiro Yomogida, 2012. "Is Emission Trading Beneficial?," Japanese Economic Review, Vol. 63(2), pp. 185-203.