Green Protection for Sale : The Impact of Industrial Lobbying on International Cooperation in the Presence of Border Carbon Adjustment

We study the influence of trade exposed producer lobby groups on national climate policies and the formation of a climate coalition if the coalition uses border carbon adjustment (BCA), protecting domestic industries. The countries regulate emissions from commodity production with carbon taxes. The commodity is traded on a perfectly competitive international market. We find that lobbying reduces the tax difference between coalition countries and outsiders and can thereby help to stabilize a larger coalition. We contribute to the literature by providing novel insights how, in the presence of BCA, industrial lobbying can improve the prospects for climate cooperation. In this case, ”green protection for sale” turns into environmental protection