The Effects of Unilateral Reduction of Greenhouse Gas Emissions on the U.S. Agriculture

This study analyses potential adverse effects of unilateral increase in GHG emission standards. The single good two regions partial equilibrium model of international trade is used to derive and interpret the conditions under which such an increase will lead to a reduction in a total level of GHG emission. We found that improvement in the global GHG emission level will be observed if the response of the home country abatement level is more elastic than that of the foreign country by the factor of the ratio of initial foreign to domestic marginal emission intensities. It is also shown that in the large industry case, the appropriate factor is adjusted by the measure of the relative market influence of two industries. The study concludes that a unilateral reduction in GHG emissions will unlikely lead to the reduction in the total GHG emissions level and may worsen the environmental situation in other regions. An appropriate multilateral agreement that involves producers from the major emitting countries is required to achieve the goal.Emission Regulation, Carbon Leakage, International Trade, Environmental Economics and Policy, International Relations/Trade,