We present a two-good, two-country overlapping generations model where emissions arise from production and each country has a domestic emission permit system. When one country unilaterally reduces her cap on emissions, her output available for domestic and foreign consumption diminishes more...

Climate change will affect the frequency, intensity and regional occurrence of extreme weather events and lead to gradual climatic changes. Although climate change impacts appear locally at first, they spread beyond political borders due to the global physical and economic interconnectedness....