Carbon Leakage: The Impact of Asymmetric Regulation on Carbon-Emitting Production

• 成果类型: Article
• 署名作者: Huang, Ximin (Natalie); Tan, Tarkan; Toktay, L. Beril
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Eindhoven University of Technology; University System of Georgia; Georgia Institute of Technology
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13181
• 发表日期: 2021
• 页码: 1886-1903
• 关键词: carbon leakage; anti-leakage policies; production technology choice; production capacity choice

摘要

Regions with carbon emission regulations bear the risk of carbon leakage if local producers shift production capacity to an unregulated region. We investigate the problem for a producer subject to geographically asymmetric emission regulation with uncertain future emission price. The producer has twoex anteoptions to lower its compliance cost: investing in clean production technology in the regulated region and building production capacity in the unregulated region. The producer determines its production quantitiesex post, after emission price uncertainty is resolved. We study two anti-leakage policies, Border Tax (BT) and Output-Based Allocation (OB), where the former adopts a stick approach that penalizes offshore production and the latter adopts a carrot approach that grants free emission allowances for production in the regulated region. First, we show that the emission price uncertainty can exert opposing effects in the absence of an anti-leakage policy: When the expected emission price is low (high), a higher uncertainty aggravates (mitigates) carbon leakage. Second, through a comprehensive comparison, we highlight that while both BT and OB are able to reduce carbon leakage, BT has a stronger effect in both the regulated and unregulated regions in multiple dimensions, especially when the carbon leakage risk is high. Third, we find that a higher emission price uncertainty weakens the effect of both BT and OB. We therefore suggest that emission price uncertainty should be accounted for when formulating anti-leakage policies. Finally, we extend our analysis to a competitive case and find that the superiority of BT relative to OB is enhanced.