Narrow Results

This study explores the carbon reduction and carbon leakage effect and their heterogeneity in different China’s carbon trading pilots. Multi-regional input–output method, and double and triple difference methods are used for calculating carbon transfer and empirical analysis of carbon leakage. The research results suggest unilateral environmental regulations can lead to positive carbon leakage to nonpilot areas through industrial transfer channels, which is evident in various accounting ranges of carbon transfer. The contribution of different pilot provinces and cities to carbon reduction and carbon leakage is heterogeneous. The above research provides reference and inspiration for China to further improve the construction of the national carbon market.

Carbon leakage and competitiveness concerns are some of the main reasons why an international environmental agreement is lacking to fight climate change. Many studies discussed the adoption of a border tax adjustment (BTA) to allow countries that would like to implement a carbon tax to level the playing field with imports. The big drawback from these studies is that the other country is not allowed to react by adopting itself a carbon tax to avoid being punished with the BTA. The model proposed in this paper looks at the optimization of two different governments and their respective firms. Parametric values inside the set [0, 1) are used to represent the possible extents of the BTA depending on both countries environmental policy allowing countries to have different carbon policies. The result that a BTA parameter of 0.5 yields the highest total welfare could increase its acceptance within the World Trade Organization (WTO).

The impact of environmental governance on the delivery of local climate change plans is examined by comparing two transatlantic sub-national jurisdictions which have adopted stringent targets for reducing greenhouse gas emissions: Scotland and the Pacific Northwest region of the United States of America. The former relies on dirigiste top-down environmental governance, through which central government sets targets and imposes statutory duties that apply equally to all local councils. In the latter, a bottom-up multi-level form of environmental governance has emerged to compensate for the absence of a federal mandate. Specific action plans from a climate change pioneer in each location are assessed to test the strengths and limitations of these alternative modes of environmental governance: Portland in Oregon and Fife in Scotland. The Scottish dirigiste approach offers its local councils a consistent policy framework, allowing them to focus on specific measures to reduce greenhouse gas emissions, while avoiding concerns about free-rider effects from non-participating councils. The asymmetrical uptake of climate change measures by United States municipalities exposes their domestic market to the risks of carbon leakage that America sought to avoid in global markets during negotiations over the Kyoto Protocol.

In the recent United Nations Framework Convention on Climate Change (UNFCCC) negotiations, sectoral trading was proposed to encourage early action and spur investment in low carbon technologies in developing countries. This mechanism involves including a sector from one or more nations in an international cap-and-trade system. We analyze trade in carbon permits between the Chinese electricity sector and a US economy-wide cap-and-trade program using the MIT Emissions Prediction and Policy Analysis (EPPA) model. In 2030, the US purchases permits valued at $42 billion from China, which represents 46% of its capped emissions. In China, sectoral trading increases the price of electricity and reduces aggregate electricity generation, especially from coal. However, sectoral trading induces only moderate increases in generation from nuclear and renewables. We also observe increases in emission from other sectors. In the US, the availability of cheap emissions permits reduces the cost of climate policy and increases electricity generation.

Using a multi-region and multi-sector computable general equilibrium model, this paper evaluates the border adjustment policies of carbon regulations in Japan. We consider five types of border adjustments and examine their effects on the welfare, carbon leakage, and competitiveness of the Japanese energy-intensive trade-exposed (EITE) sectors.

Our analysis shows that no single border adjustment policy is superior to the other policies in terms of simultaneously solving three primary issues: Welfare degradation, carbon leakage, and a loss of competitiveness in the EITE sectors. In addition, we show that export border adjustments are effective at restoring the competitiveness of Japanese exporters and reducing leakage. Our analysis also reveals that border adjustment in Japan significantly affects carbon leakage to China and the competitiveness of the iron and steel sectors. Finally, we show that border adjustments with and without consideration of indirect emissions have similar impacts, which indicates that the information regarding direct emissions is sufficient for implementing border adjustment in Japan.

In the wake of the Paris Climate Agreement, countries may employ sectoral approaches. These allow for efficiency gains while at the same time addressing the concerns of competitiveness and carbon leakage. Applying a multi-country, multi-sector dynamic CGE model, this paper explores the role of sector emission targets for the steel sector in an international agreement, their interaction with emissions trading systems, and to which extent sector targets may address competitiveness concerns. To better reflect technological realities, the steel sector is disaggregated into its two main industries: primary fossil fuel-based steel production (BOF) and secondary scrap recycling steel production (EAF). The policy simulations suggest that sectoral targets may effectively counter the (negative) output and competitiveness effects of differences in the stringency of climate policy across countries. BOF steel contributes significantly more to emission reductions than EAF steel. Moreover, the output effects of BOF and EAF are of opposite signs.