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Regional Trade Agreements, Emissions Bubbles, and Carbon Tariff Harmonization

Yazid Dissou and Muhammad Shahid Siddiqui

Year: 2013
Volume: Volume 34
Number: Number 2
DOI: 10.5547/01956574.34.2.3
View Abstract

In the context of sub-global participation in greenhouse gas mitigation efforts, this paper investigates the effectiveness of a Canada-U.S. emissions bubble under their existing regional trade agreement. It also explores the potential economic impact of carbon tariff harmonization through the implementation of a common Canada-U.S. external border tariff adjustment as a mean to address competitiveness issues. Using a multi-region, multi-sector computable general equilibrium model, the paper finds that the creation of an emission bubble between the two countries could improve efficiency. The findings also suggest that a carbon tariff harmonization policy could give rise to distributional issues among Annex I regions and could fail to mitigate the negative competitiveness impacts of carbon abatement policies.

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