Unilateral CO2 Reduction Policy with More Than One Carbon Energy Source

We examine an open economy’s strategy to reduce its carbon emissions by replacing consumption of coal—very intensive—with gas—less so. Unlike the standard theoretical approach leakage, we show that unilateral CO2 reduction policies generate a higher leakage rate in presence more than one energy source and may turn counterproductive, ultimately increasing world emissions. establish testable conditions as whether tax on domestic increases exploitation gas such global also characterize this strategy’s implications for climate policy rest world. Finally, present illustrative application our results United States.