Abstract
We empirically investigate the GHG emissions embodied in the bilateral trade between the United States and China and the United States and India and their countryspecific and global environmental impacts. In order to address the concerns of “levelplaying-field” and carbon leakage associated with domestic carbon pricing scheme, various border carbon adjustments have been proposed in recent U.S. climate change legislation. Employing GTAP-E model, this study examines how and to what extent the proposed carbon tariffs and export subsidies potentially affect bilateral trade flow, domestic production, and the GHG emissions. Results indicate that carbon tariff effectively alleviates the impact of domestic carbon tax on vulnerable domestic industries and slightly raises their output and GHG emissions. In addition, it is also evident that a combined or full border adjustment policy has bigger impacts than an individual policy.
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