Impacts of emission reduction policies in a multi-regional multi-sectoral small open economy with endogenous growth

Raouf Boucekkine and Germain Marc
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Germain Marc: UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)

No 2007010, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: The burden sharing of pollution abatement costs raises the issue of how to share the costs between entities (country, region or industry) and how the pollution permits should be distributed between the parties involved. This paper explores this issue in the framework of a dynamic endogenous growth 2 sectors - 2 regions - 2 inputs Heckscher-Ohlin model of a small open multi-regional economy with an international tradable permits market. Give an “emission-based grand-fathering” sharing rule, capital accumulation is more negatively affected by the environmental policy in the energy intensive sector. We show that such a property does not necessarily hold with a “production-based grand-fathering” sharing rule. We also show that the impact on capital is likely to translate into the sectoral added value level after some time, specially if the economy is submitted to an increasingly constraining environmental policy driving up the ratio price of permits to price of energy. Finally, we show that the impact of environmental policy at the regional level depends crucially on the specialization of the region along the baseline.

Keywords: Pollution permits; Grand-fathering; Sectoral spillovers; Multi-regional economy; Endogenous growth (search for similar items in EconPapers)
JEL-codes: D58 E22 H21 O40 (search for similar items in EconPapers)
Pages: 23
Date: 2007-03-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-mac and nep-reg
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Related works:
Working Paper: Impacts of emission reduction policies in a multi-regional multi-sectoral small open economy with endogenous growth (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2007010

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