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Exchanging Goods and Damages: The Role of Trade on the Distribution of Climate Change Costs

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  • Oliver Schenker

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Abstract

The impacts of climate change vary significantly across world regions. Whereas tropical and subtropical regions are expected to suffer severely from the effects of climate change, the impacts in northern latitudes should remain relatively moderate. However, regions are not self-sufficient, and the costs of climate change can spread across regions through international trade. I study the international spillover of climate impacts within a regionalised, climate-sensitive, dynamic computable general equilibrium model of the world economy. Using data from a global climate model shows that the world regions face welfare losses between 0.6 and 2.1 % due to climate change. I also show that climate change affects terms of trade and sectoral competitiveness. By means of a decomposition method, the extent of spillover impacts through international trade can be identified. Spillover impacts significantly affect, either positively or negatively, the total costs of climate change for a region. For regions with low exposure to climate change and high adaptive capacities, spillover effects are responsible for a 1/6 of the total cost of climate change. Copyright Springer Science+Business Media B.V. 2013

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File URL: http://hdl.handle.net/10.1007/s10640-012-9593-z
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 54 (2013)
Issue (Month): 2 (February)
Pages: 261-282

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Handle: RePEc:kap:enreec:v:54:y:2013:i:2:p:261-282

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Climate change; Decomposition of general equilibrium effects; International trade; Multi-regional dynamic CGE model;

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  1. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
  2. M. Ayhan Kose & Kei-Mu Yi, 2005. "Can the standard international business cycle model explain the relation between trade and comovement?," Working Papers 05-3, Federal Reserve Bank of Philadelphia.
  3. Fankhauser, Samuel & S.J. Tol, Richard, 2005. "On climate change and economic growth," Resource and Energy Economics, Elsevier, vol. 27(1), pages 1-17, January.
  4. Baxter, Marianne & Kouparitsas, Michael A., 2005. "Determinants of business cycle comovement: a robust analysis," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 113-157, January.
  5. Lau, Morten I. & Pahlke, Andreas & Rutherford, Thomas F., 2002. "Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 577-609, April.
  6. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
  7. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  8. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 1999. "Decomposing Simulation Results with Respect to Exogenous Shocks," Centre of Policy Studies/IMPACT Centre Working Papers ip-73, Victoria University, Centre of Policy Studies/IMPACT Centre.
  9. Benjamin F. Jones & Benjamin A. Olken, 2010. "Climate Shocks and Exports," American Economic Review, American Economic Association, vol. 100(2), pages 454-59, May.
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