Limiting Emissions and Trade: Some Basic Ideas

15 Pages Posted: 7 Jul 2010 Last revised: 14 Feb 2021

See all articles by Kala Krishna

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2010

Abstract

The computable general equilibrium models used in the literature tend to be a bit of a black box. This paper provides some intuition behind what goes on in these black boxes by laying out a simple general equilibrium model and intuitively explaining what lies behind the demand for emissions. It traces out how a reduction in total emissions allowed in one country aspects the general equilibrium and the determinants of the extent of leakage in the model as well as more generally. It concludes with some implications for policy.

Suggested Citation

Krishna, Kala, Limiting Emissions and Trade: Some Basic Ideas (July 2010). NBER Working Paper No. w16147, Available at SSRN: https://ssrn.com/abstract=1635670

Kala Krishna (Contact Author)

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