previous work to simultaneously include both leakage and volatility. Motivated by discussions on how to reform carbon markets … around the world, and in Europe in particular, we use our model to revisit several critical issues in the design of these … deducting OBA permits (the majority going to trade-exposed and carbon intensive sectors) from the overall permit allocation, so …

counterproductive, ultimately increasing world emissions. We establish testable conditions as to whether a unilateral tax on domestic CO … characterize this strategy's implications for climate policy in the rest of the world. Finally, we present an illustrative …