@article{Zhang:249525,
      recid = {249525},
      author = {Zhang, Zengkai and Zhang, ZhongXiang},
      title = {Intermediate input linkage and carbon leakage},
      address = {2016-09},
      number = {450-2016-34056},
      pages = {33},
      year = {2016},
      abstract = {Climate regulations tend to target energy intensive  sectors whose products are widely used in industrial  production as intermediate inputs, such as electricity, and  the carbon abatement may be partially offset by  intermediate input-led leakage. This paper aims to examine  the impact of intermediate input linkage on the carbon  leakage both theoretically and empirically. We develop a  Harberger-type model with an input-output linkage  structure, identify four leakage effects and derive  closed-form solutions for these leakage effects. For  empirical simulation, we build a computable general  equilibrium model of China’s economy and introduce  Structural Decomposition Analysis to link both the  theoretical and empirical models. When imposing a carbon  price on the electricity generation sector, our results  show significant carbon leakage. Our decomposition analysis  further suggests that such leakage is mainly through the  production substitution effect, followed by the multiplier  effect. Both of the two effects are closely related to the  intermediate input linkage, and thus shed some light on the  importance of considering sectoral linkage when discussing  the carbon leakage issue of climate policies.},
      url = {http://ageconsearch.umn.edu/record/249525},
      doi = {https://doi.org/10.22004/ag.econ.249525},
}