Optimal tariff calculations in tariff games with climate change considerations

Abstract

We discuss whether the introduction of climate change considerations into Nash tariff games increases or reduces post-retaliation tariffs. We briefly discuss how climate change considerations can be introduced into computational trade models. We then calculate optimal tariffs in comparable conventional (no climate change considerations present) and with climate change trade models. Results show that compared with conventional trade models, adding climate change considerations reduces the level of optimal tariffs, but this only occurs when the damage effects involved are large.

Acknowledgements

We are grateful to the Center for International Governance Innovation (CIGI), and the Academic Development Fund of the University of Western Ontario and the Ontario Research Fund for financial support. Yan Dong acknowledges the financial support from Minister of Human Resources and Social Security of China for the Scientific Research Foundation for Returned Overseas Chinese Scholars.