Climate effects of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a theoretical analysis on the economic...

This paper analyzes environmental concerns by a government in a setting of rent-extracting strategic trade policy with endogenous firm investment into production technologies. The simple analysis highlights the importance of investment incentives caused by tariffs in general and shows that the...