Work

Global Carbon Taxation: Analyzing Pollution Effects When Mobile Firms Trade

Year: 2025

Type: article

Abstract: ABSTRACT This paper examines the implications of a global carbon tax within a framework that includes asymmetrically sized countries, imperfectly competitive markets, and mobile, heterogeneous firms engaged in international trade. In the short run, the tax primarily produces Pigouvian effects—raising prices, reducing production, and lowering emissions, which aligns with established literature. In the long run, the mobility of firms introduces additional effects, influenced by trade intensity. Specifically, the tax acts as a dispersion force, encouraging firms to relocate to smaller markets to minimize tax burdens, thus revealing its spatial non‐neutrality across varying market sizes. High trade costs exacerbate this effect, potentially eliminating the most environmentally favorable locations. From a welfare perspective, the tension between consumer surplus and emissions can be mitigated if consumers are environmentally conscious and green policies are complemented by trade policies.

Source: Journal of Public Economic Theory

DOI: 10.1111/jpet.70051

Authors: Nelly Exbrayat, Stéphane Riou, Skerdilajda Zanaj

Institutions: Centre National de la Recherche Scientifique, Groupe d'Analyse et de Théorie Economique Lyon St Etienne, Université Jean Monnet, Université Jean Monnet, University of Luxembourg

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Climate action

Open Access status: hybrid

Estimated APC paid: $3,350