No abstract

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We extend the model of Fullerton et al (2011) to explore cost-effectiveness of unilateral climate policy in the presence of leakage. We ignore the welfare gain from reducing greenhouse gas emissions and focus on the welfare cost of the emissions tax or permit scheme. Whereas that prior paper solves for changes in emissions quantities and finds that leakage maybe negative, we show here that all cases with negative leakage in that model are cases where a unilateral carbon tax results in a welfare loss. With positive leakage, however, a unilateral policy can improve welfare.Our email addresses are baylis@illinoise.edu, dfullert@illinois.edu and dkarney2@illinois.edu. This paper is extremely preliminary; please do not send it to anybody.

No abstract

We extend the model of Fullerton et al (2011) to explore cost-effectiveness of unilateral climate policy in the presence of leakage. We ignore the welfare gain from reducing greenhouse gas emissions and focus on the welfare cost of the emissions tax or permit scheme. Whereas that prior paper solves for changes in emissions quantities and finds that leakage maybe negative, we show here that all cases with negative leakage in that model are cases where a unilateral carbon tax results in a welfare loss. With positive leakage, however, a unilateral policy can improve welfare.Our email addresses are baylis@illinoise.edu, dfullert@illinois.edu and dkarney2@illinois.edu. This paper is extremely preliminary; please do not send it to anybody.