Negative leakage
By: Don Fullerton, Daniel Karney, Kathy Baylis
Contributors: Karney, Daniel H.; Baylis, Kathy; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17001; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17001.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We build a simple analytical general equilibrium model and linearize it, to find a closed-from expression for the effect of a small change in carbon tax on leakage - the increase in emissions elsewhere.  The model has two goods produced in two sectors or regions.  Many identical consumers buy both goods using income from a fixed stock of capital that is mobile between sectors.  An increase in one sector's carbon tax raises the price of its output, so consumption shifts to the other good, causing positive carbon leakage.  However, the taxed sector substitutes away from carbon into capital.  It thus absorbs capital, which shrinks the other sector, causing negative leakage.  This latter effect could swamp the former, reducing carbon emissions in both sectors"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/7/2011.

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