Carbon leakage and green growth

This dissertation consists of four chapters. A general introduction to the problem of carbon leakage and the necessity of sustainable development is furnished in the first chapter. In chapter 2, we investigate the conditions under which a donor country is motivated to give unconditional mitigation aid to a less developed recipient, and we analyse the effect of such aid on the growth path of the recipient country. In the third chapter, we extend Melitz 2003 trade model to study carbon leakage and the distortion in international competitiveness on the firm level. Furthermore, we analyse the effectiveness of border adjustments to tackle these concerns focusing on the role of the link between firm-specific emission intensity and its productivity level. In the fourth chapter, we theoretically analyse the growth and welfare impacts of Border Carbon Taxes (BCT) between trading countries, along with investigating the effects of initial asymmetry in development levels on the transitional growth paths across countries. Moreover, we investigate how carbon leakage evolve dynamically, and how effective BCT in tackling it.