The paper, by Mark Sanctuary, undertakes a formal analysis of the potential strategic implications of BCA measures. The strategic impacts of a BCA on unilateral climate policies and trade policies under a trade agreement and in the absence of a trade agreement. The analysis also identifies conditions under which home prefers to substitute its tariff for a BCA. In this setting, irrespective of a trade agreement, a BCA is shown to reduce global emissions and improve home's welfare, albeit at the expense of foreigner's welfare.
Read the paper here. (pdf, 266.5 kB)