Keywords: CO&, lt, SUB align=, right&, gt, 2 abatement strategies, unilateral action, grandfathered emission permits
Global CO2 emissions and unilateral action: policy implications of induced trade effects
Unilateral action to combat an international externality such as CO2 emissions produces efficiency losses through spill-over effects of carbon emission constraints on international markets. Emissions by non-participating countries may be increased through the relocation of energy-intensive production or reductions in the international oil price (so-called carbon leakage). Grandfathered emission permit systems are considered as one unilateral mitigation strategy which could avoid carbon leakage and increase efficiency of global CO2 reduction as compared to unilateral uniform CO2 taxes. This paper summarises results from a multiregional computable general equilibrium (CGE) model application  which show that the efficiency argument for the use of grandfathered permits depends crucially on the specification of international trade.