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Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade

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  • Rahel Aichele

    ()

  • Gabriel J. Felbermayr

Abstract

Has the Kyoto Protocol induced carbon leakage? We conduct the first empirical ex-post evaluation of the Protocol. We derive a theoretical gravity equation for the CO2 content of trade, which accounts for intermediate inputs, both domestic and imported. The structure of our new panel database of the carbon content of sectoral bilateral trade flows allows controlling for the endogenous selection of countries into the Kyoto Protocol. Binding commitments under Kyoto have increased committed countries’ embodied carbon imports from non-committed countries by around 8% and the emission intensity of their imports by about 3%. Hence, Kyoto has indeed led to leakage.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-11/cesifo1_wp3661.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3661.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3661

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Related research

Keywords: carbon leakage; CO2 content of trade; gravity equation; Kyoto Protocol;

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References

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  1. Baldwin, Richard, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
  2. Satoshi Nakano & Asako Okamura & Norihisa Sakurai & Masayuki Suzuki & Yoshiaki Tojo & Norihiko Yamano, 2009. "The Measurement of CO2 Embodiments in International Trade: Evidence from the Harmonised Input-Output and Bilateral Trade Database," OECD Science, Technology and Industry Working Papers 2009/3, OECD Publishing.
  3. Arik Levinson, 2007. "Technology, International Trade, and Pollution from U.S. Manufacturing," NBER Working Papers 13616, National Bureau of Economic Research, Inc.
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  6. Aichele, Rahel & Felbermayr, Gabriel, 2012. "Kyoto and the carbon footprint of nations," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 336-354.
  7. Daniel Trefler & Susan Chun Zhu, 2005. "The Structure of Factor Content Predictions," NBER Working Papers 11221, National Bureau of Economic Research, Inc.
  8. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
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  11. Ralph Ossa, 2011. "A “New Trade” Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122 - 152.
  12. Aakvik, Arild & Tjøtta, Sigve, 2011. "Do collective actions clear common air? The effect of international environmental protocols on sulphur emissions," European Journal of Political Economy, Elsevier, vol. 27(2), pages 343-351, June.
  13. Josh Ederington, Arik Levinson & Jenny Minier, 2003. "Footlose and Pollution Free," Working Papers gueconwpa~03-03-04, Georgetown University, Department of Economics.
  14. Josh Ederington & Jenny Minier, 2003. "Is environmental policy a secondary trade barrier? An empirical analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 137-154, February.
  15. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2000. "Carbon Emission Leakages: A General Equilibrium View," OECD Economics Department Working Papers 242, OECD Publishing.
  16. Babiker, Mustafa H., 2005. "Climate change policy, market structure, and carbon leakage," Journal of International Economics, Elsevier, vol. 65(2), pages 421-445, March.
  17. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
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Cited by:
  1. Rahel Aichele & Gabriel J. Felbermayr, 2011. "Estimating the effects of Kyoto on bilateraltrade flows using matching econometrics," Ifo Working Paper Series Ifo Working Paper No. 119, Ifo Institute for Economic Research at the University of Munich.
  2. Rahel Aichele & Gabriel Felbermayr, 2011. "Internationaler Handel und Carbon Leakage," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(23), pages 26-30, December.

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