Production Network and Emission Control Targets-Theoretical Approach

Abstract

Abstract By spurring trade, the level of income and consumption and production increase, which consequently causes a more polluted environment. As global economic integration escalates, the possibility of contention becomes more translucent. The foundation of this article is based on the Ricardian model regarding consumption and production pollution function in six scenarios depending on Autarky or trade situation. There is also a difference in the relative labour size of countries. Also, pollution tightness can clarify whether there are any concerns about climate change regarding the production pollution function and consumption pollution function. The theoretical approach proves that unemployment does not occur when we have no concerns about climate change and this tightness of pollution would not impact the level of production and consumption. The emission intensity, relative labour size and tightness of pollution targets are the key elements discussed in both Autarky and trade. The critical point about trade is that it enters specialization, and the home country only produces good 1 and the foreign country only produces good 2. The main finding of this paper, based on a simple theoretical approach, is about the impact of one unit change in relative labour size regarding pollution tightness with respect to the labour force of both home and foreign countries is provided at the end.