Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261214 
Year of Publication: 
2022
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 25/2022
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
In a dynamic, three-region environmental multi-sector general equilibrium model (called EMuSe), we find that carbon pricing generates a recession initially as production costs rise. Benefits from lower emissions damage materialize only in the medium to long run. A border adjustment mechanism mitigates but does not prevent carbon leakage, but it 'protects' dirty domestic production sectors in particular. From the perspective of a region that introduces carbon pricing, the downturn is shorter and long-run benefits are larger if more regions levy a price on emissions. However, for non-participating regions, there is no incremental incentive to participate as they forego trade spillovers from carbon leakage and face higher production costs along the transition. In the end, they may be better off not participating. Because of the costly transition, average world welfare may fall as a result of global carbon pricing unless 'the rich' assist 'the poor'.
Subjects: 
Carbon Pricing
Border Adjustment
Climate Clubs
International Dynamic General Equilibrium Model
Sectoral Heterogeneity
Input-Output Matrix
JEL: 
E32
E50
E62
H32
Q58
ISBN: 
978-3-95729-896-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.