Modeling the issue of leakage, researchers consider a scenario in which parts of the world impose emissions restrictions and the rest of the world remains passive. They propose optimal tax policies for both suppliers and demanders of fossil fuels, breaking down optimal strategies for aligning incentives among demanders that produce goods vs. consume goods.
Abstract and Citation
Trade, Leakage, and the Design of a Carbon Tax
David Weisbach, Samuel S. Kortum, Michael Wang, and Yujia Yao NBER Working Paper No. 30244
JEL No. F18,H23,Q54