This paper analyzes carbon leakage due to reduced emissions from deforestation (RED). We find that leakage with RED is good because the policy induces afforestation that contributes to a further carbon sequestration. By ignoring the domestic component of carbon leakage, the literature can either...

We show carbon leakage depends on the type of biofuel policy (tax credit versus mandate), the domestic and foreign gasoline supply and fuel demand elasticities, and on consumption and production shares of world oil markets for the country introducing the biofuel policy. The components of carbon...