A sufficiently rapidly rising carbon tax may increase near-term emissions compared with the case of no carbon tax. Even so, such a carbon tax path may reduce total costs related to climate change, since the tax may reduce total carbon extraction. A government cannot commit to a specific carbon...

We build a simple analytical general equilibrium model and linearize it, to find a closed-from expression for the effect of a small change in carbon tax on leakage - the increase in emissions elsewhere. The model has two goods produced in two sectors or regions. Many identical consumers buy both...