Climate Engineering in an Interconnected World: The Role of Tariffs

Abstract

This paper investigates strategic trade policies as a response to negative externalities linked to climate engineering. Parties negatively affected, or which only perceive damages, may react to geoengineering by deploying trade sanctions, i.e. the imposition of tariffs. By introducing a dynamic trade model, we show that geoengineering-averse countries have an incentive to implement or increase existing tariffs when the other country uses geoengineering. Our contribution is to highlight that potential consequences on trade should be taken into account before climate engineering techniques are applied. This is particularly crucial in our globalized world since a successful climate policy demands large scale if not global cooperation.

Preface: Special issue of Dynamic Games and Applications in Memory of Professor Engelbert J. Dockner

“…Eigruber and Wirl [10] investigate strategic trade policies in the context of climate policies. In their model, the home country engages in geoengineering activities to reduce the temperature, but these activities generate negative externalities on the foreign country.…”