Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101956
Authors: 
Sanna-Randaccio, Francesca
Sestini, Roberta
Tarola, Ornella
Year of Publication: 
2014
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 55.2014
Abstract: 
We contribute to the debate on the impact of unilateral climate policy with a two-country two-firm international oligopoly model accounting for endogenous plant location and heterogeneity in both country size and firm’s emissions technology. Our results suggest that, if the carbon price differential is moderate as compared to unit transport costs and the relative size of the highly regulated country is big enough, a no relocation equilibrium may prevail also in the long run. A large market asymmetry coupled with a small technology gap emerges as the only configuration in which unilateral climate policy leads to a fall in world emissions irrespective of the optimal location choice. Thus for being effective and not leading to production relocation, unilateral climate policy should be moderate, implemented by a sufficiently large area and complemented by mechanisms for promoting the international transfer of clean technologies. Welfare implications are also discussed.
Subjects: 
Foreign Direct Investment. Carbon leakage. Climate Policy
Emissions Technologies
JEL: 
F12
F23
Q58
Document Type: 
Working Paper

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