The effects of carbon tariff on imports into the US: A game analysis

Taking the effect of carbon tariff on the import as a classification standard, this paper formulates a theoretical analysis framework to study the effect of carbon tariff on imports into the US. In the model, the optimal carbon tariff to the US and the optimal subsidy to developing countries are addressed. Intuitively, the results derived from the model show that introducing carbon tariff will reduce developing countries' exports to the US market and increase the developed countries' welfare. Besides, a number of different situations are analyzed in this study. They include opportunity costs of subsidy, subsidy timing, the number of enterprises, horizontal product differentiation, and market segmentation. For each of these situations, policy recommendations are derived to cope with the effects of carbon tariff.