An Analysis And Comparison On Economic And Environmental Effects Of Climate Policies

On the basis of the hypothesis that the products are homogeneous and differentrespectively, a duopoly dynamic differential game model is established to analyze the economicand environmental impacts of carbon tax, tradable carbon emission permits andcommand-and-control. By backward induction, feedback Nash equilibriums of these threeregulation policies are obtained. Comparative analysis reveals that a higher carbon tax rate inhome country can increase output and net emission reduction in foreign country—existence of‘rent-shifting’ effect and ‘carbon leakage’ phenomenon; an increase of tradable carbon emissionpermits can reduce output and net emission reduction in foreign country—there is neither‘rent-shifting’ effect nor ‘carbon leakage’ phenomenon; a decrease of the cap ofcommand-and-control will increase output but decrease net emission reduction in foreigncountry—there is only ‘rent-shifting’ effect but no ‘carbon leakage’ phenomenon. The furtherresearch shows that, if not cooperate and products are different, among the three carbonemission regulations, no one is strictly superior to others from the view of the carbon emission;if products are homogenous, policy of tradable carbon emission permits performs best. Ifcooperate, no matter the products are different or homogenous, the government should adopttradable carbon emission permits policy or command-and-control policy at first, and then adoptcarbon tax policy. What’s more, no matter what kind of policy is taken, cooperative policiesperform better than uncooperative ones in the view of carbon emission.