Working Paper: NBER ID: w14880
Authors: Yan Dong; John Whalley
Abstract: This paper presents both analytics and numerical simulation results relevant to proposals for carbon motivated regional trade agreements summarized in Dong & Whalley(2008). Unlike traditional regional trade agreements, by lowing tariffs on participant's low carbon emission goods and setting penalties on outsiders to force them to join such agreements , carbon motivated regional trade agreements reflect an effective merging of trade and climate change regimes, and are rising in profile as part of the post 2012 Copenhagen UNFCC negotiation. By adding country energy extraction cost functions, we develop a multi-region general equilibrium structure with endogenously determined energy supply. We calibrate our model to business as usual scenarios for the period 2006-2036. Our results show that carbon motivated regional agreements can reduce global emissions, but the effect is very small and even with penalty mechanisms used, the effects are still small. This supports the basic idea in our previous policy paper that trade policy is likely to be a relatively minor consideration in climate change containment.
Keywords: Carbon motivated trade agreements; Regional trade agreements; Climate change; General equilibrium model
JEL Codes: F13; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CMRTAs (R59) | global carbon emissions (Q54) |
| Penalty mechanisms applied to third parties (H22) | overall effect on emissions (Q52) |
| Participation in CMRTAs (R59) | increased emissions in EU and US (F64) |
| Participation in carbon free trade areas (F15) | decrease in emissions in China (F64) |
| CMRTAs (R59) | welfare for certain regions (I38) |