Unilateral environmental policy and offshoring

Simon J. Bolz, Fabrice Naumann and Philipp Richter ()

No 110, W.E.P. - Würzburg Economic Papers from University of Würzburg, Department of Economics

Abstract: Expanding on a general equilibrium model of offshoring, we analyze the effects of a unilateral emissions tax increase on the environment, income, and inequality. Heterogeneous firms allocate labor across production tasks and emissions abatement, while only the most productive can benefit from lower labor and/or emissions costs abroad and offshore. We find a non-monotonic effect on global emissions, which decline if the initial difference in emissions taxes is small. For a sufficiently large difference, global emissions rise, implying emissions leakage of more than 100%. The underlying driver is a global technique effect: While the emissions intensity of incumbent non-offshoring firms declines, the cleanest firms start offshoring. Moreover, offshoring firms become dirtier, induced by a reduction in the foreign effective emissions tax in general equilibrium. Implementing a BCA prevents emissions leakage, reduces income inequality in the reforming country, but raises inequality across countries.

Keywords: Offshoring; Emissions leakage; Environmental policy; BCA; Heterogeneous firms; Income inequality (search for similar items in EconPapers)
JEL-codes: F12 F15 F18 Q58 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/295231/1/1888285443.pdf (application/pdf)

Related works:
Working Paper: Unilateral Environmental Policy and Offshoring (2024)
Working Paper: Unilateral environmental policy and offshoring (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:wuewep:295231

DOI: 10.25972/OPUS-35903

Access Statistics for this paper

More papers in W.E.P. - Würzburg Economic Papers from University of Würzburg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().