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Carbon motivated regional trade arrangements: Analytics and simulations

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  • Dong, Yan
  • Whalley, John

Abstract

This paper presents both analytics and numerical simulation results relevant to proposals for carbon motivated regional trade agreements summarized in Dong and Whalley (2010). 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.

Suggested Citation

  • Dong, Yan & Whalley, John, 2011. "Carbon motivated regional trade arrangements: Analytics and simulations," Economic Modelling, Elsevier, vol. 28(6), pages 2783-2792.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2783-2792
    DOI: 10.1016/j.econmod.2011.08.016
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    1. Yan Dong & John Whalley, 2010. "Carbon, Trade Policy and Carbon Free Trade Areas," The World Economy, Wiley Blackwell, vol. 33(9), pages 1073-1094, September.
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    Cited by:

    1. Zhang, Zhong Xiang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," International Review of Environmental and Resource Economics, now publishers, vol. 6(3), pages 225-287, December.
    2. Weiguang Chen & Qing Guo, 2017. "Assessing the Effect of Carbon Tariffs on International Trade and Emission Reduction of China’s Industrial Products under the Background of Global Climate Governance," Sustainability, MDPI, vol. 9(6), pages 1-17, June.
    3. Böhringer, Christoph & Fischer, Carolyn & Rosendahl, Knut Einar, 2014. "Cost-effective unilateral climate policy design: Size matters," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 318-339.
    4. Lian-Biao Cui & Ma-Lin Song, 2017. "Designing and Forecasting the Differentiated Carbon Tax Scheme Based on the Principle of Ability to Pay," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-25, February.
    5. Khan, Jamal & Li, Yuan & Girardin, Eric, 2022. "Is a clash coming when trade and climate meet at the border? The impact of the EU's carbon border adjustment on China's belt and road initiative," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 112-124.
    6. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2015. "Carbon-based border tax adjustments and China’s international trade: analysis based on a dynamic computable general equilibrium model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 329-360, April.
    7. Yujing Niu & Wenying Chen & Zongxin Wu, 2013. "The Economic and Environmental Impact on China of Carbon Tariffs Based on Gage Model," Energy & Environment, , vol. 24(7-8), pages 1295-1307, December.
    8. Saibal Kar & Devleena Majumdar, 2016. "MFN Tariff Rates and Carbon Emission: Evidence from Lower-Middle-Income Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(3), pages 493-510, July.
    9. Yan Dong & John Whalley, 2011. "Optimal tariff calculations in tariff games with climate change considerations," Applied Economics Letters, Taylor & Francis Journals, vol. 18(15), pages 1431-1435.
    10. Yan Dong & John Whalley, 2010. "Carbon, Trade Policy and Carbon Free Trade Areas," The World Economy, Wiley Blackwell, vol. 33(9), pages 1073-1094, September.
    11. Bao, Qin & Tang, Ling & Zhang, ZhongXiang & Wang, Shouyang, 2013. "Impacts of border carbon adjustments on China's sectoral emissions: Simulations with a dynamic computable general equilibrium model," China Economic Review, Elsevier, vol. 24(C), pages 77-94.
    12. Yan Dong & John Whalley, 2009. "A Third Benefit of Joint Non-OPEC Carbon Taxes: Transferring OPEC Monopoly Rent," CESifo Working Paper Series 2741, CESifo.
    13. Yadira Mori-Clement & Stefan Nabernegg & Birgit Bednar-Friedl, 2018. "Can preferential trade agreements enhance renewable electricity generation in emerging economies? A model-based policy analysis for Brazil and the European Union," Graz Economics Papers 2018-19, University of Graz, Department of Economics.
    14. Dong, Yan & Whalley, John, 2012. "Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 49-63.
    15. Henningsen, Arne & Henningsen, Geraldine & van der Werf, Edwin, 2019. "Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998)," Energy Economics, Elsevier, vol. 82(C), pages 16-25.
    16. Jeremiás Máté Balogh & Tamás Mizik, 2023. "Global Impacts of Climate Policy and Trade Agreements on Greenhouse Gas Emissions," Agriculture, MDPI, vol. 13(2), pages 1-13, February.
    17. Shuai Chen & Jiameng Yang, 2023. "Environmental Pollution Liability Insurance Pricing and the Solvency of Insurance Companies in China: Based on the Black–Scholes Model," IJERPH, MDPI, vol. 20(2), pages 1-21, January.
    18. Zhao, Bei & Yarime, Masaru, 2022. "The impacts of carbon tariffs on international trade flows and carbon emissions: An analysis integrating trade elasticities with an application to US-China trade," Energy Economics, Elsevier, vol. 115(C).
    19. Bao, Qin & Tang, Ling & Zhang, ZhingXiang & Qiao, Han & Wang, Shouyang, 2012. "Impact of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibirum Model," Working Papers 249391, Australian National University, Centre for Climate Economics & Policy.
    20. Jeremiás Máté Balogh & Tamás Mizik, 2021. "Trade–Climate Nexus: A Systematic Review of the Literature," Economies, MDPI, vol. 9(3), pages 1-19, June.
    21. Chen, Hong & Gangopadhyay, Partha & Singh, Baljeet & Shankar, Sriram, 2022. "Measuring preferences for energy efficiency in ACI and EU nations and uncovering their impacts on energy conservation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).
    22. Partha Gangopadhyay & Narasingha Das, 2022. "Can Energy Efficiency Promote Human Development in a Developing Economy?," Sustainability, MDPI, vol. 14(21), pages 1-20, November.
    23. Balogh, Jeremiás Máté, 2021. "A kereskedelmi megállapodások szerepe a klímaváltozásban. Szakirodalmi áttekintés [The role of trade agreements in climate change. Systematic literature review]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 540-563.

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    More about this item

    Keywords

    Carbon; Trade; Agreements; Tariffs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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