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Abstract
While greenhouse gas emissions trading schemes, taxes and other measures have
already been implemented or are proposed in many countries and regions, global
action to mitigate climate change remains insufficient. A major concern in many
countries is that actions taken alone, or even in a limited coalition of countries,
might result in competitive disadvantage to firms in emissions-intensive, tradeexposed
industries. Additionally, this might results in emissions leakage, reducing
environmental effectiveness.
The problem of emissions leakage has been extensively studied in the case of
mitigation by individual or coalitions of developed countries, most often, using
comparative static partial or general equilibrium models. In this paper we use a
multiregional dynamic general equilibrium model to study the imposition of
harmonised carbon taxes on industrial and energy greenhouse gas emissions in
OECD countries and in China. This tax rate is increasing over time. We find that
the overall rate of emissions leakage is very low and decreases over time. We also
find significant differences between regions in the marginal rates of leakage with
respect to their participation (or not) in the carbon-pricing coalition. Differences
in leakage rates and their change over time can be related to differences in energy
systems, general economic structure and growth rates.