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Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement

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  • Anderson, Kym
  • McKibbin, Warwick

Abstract

International negotiations for an agreement to reduce the emission of greenhouse gases are unlikely to produce concrete and comprehensive policies for effective emission reductions in the near term, not least because the policy measures being considered are economically very costly to major industries in rich countries and are unlikely to prevent ‘leakage’ through a re-location of carbon-intensive activities to poorer countries. An alternative or supplementary approach that is more likely to achieve carbon and methane emission reductions, and at the same time generate national and global economic benefits rather than costs, involves lowering coal subsidies and trade barriers. Past coal policies which encouraged excessive production of coal in a number of industrial countries and excessive coal consumption in numerous developing and transition economies are currently under review and in some cases are being reformed. This paper documents those distortions and outlines the circumstances under which their reform could not only improve the economy but also lower greenhouse gas emissions globally. It also provides modelling results which quantify the orders of magnitudes that could be involved in reducing those distortions. The effects on economic activity as well as global carbon emissions are examined using the G-Cubed multi-country general equilibrium model of the world economy. Both the gains in economic efficiency and the reductions in carbon dioxide emissions that could result from such reforms are found to be substantial – a ‘no regrets’ outcome or win-win Pareto improvement for the economy and the environment that contrasts markedly with many of the costly proposals currently being advocated to reduce greenhouse gases.

Suggested Citation

  • Anderson, Kym & McKibbin, Warwick, 1997. "Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement," CEPR Discussion Papers 1698, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1698
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    References listed on IDEAS

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    1. Steenblik, R. P. & Wigley, K. J., 1990. "Coal policies and trade barriers," Energy Policy, Elsevier, vol. 18(4), pages 351-367, May.
    2. Hiro Lee & Joaquim Oliveira Martins & Dominique van der Mensbrugghe, 1994. "The OECD Green Model: An Updated Overview," OECD Development Centre Working Papers 97, OECD Publishing.
    3. Anderson, Kym, 1995. "Lobbying Incentives and the Pattern of Protection in Rich and Poor Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 43(2), pages 401-423, January.
    4. Anderson, Kym, 1995. "The political economy of coal subsidies in Europe," Energy Policy, Elsevier, vol. 23(6), pages 485-496, June.
    5. McKibbin, Warwick J. & Wilcoxen, Peter J., 1998. "The theoretical and empirical structure of the G-Cubed model," Economic Modelling, Elsevier, vol. 16(1), pages 123-148, January.
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    7. Steenblik, Ronald P & Coroyannakis, Panos, 1995. "Reform of coal policies in Western and Central Europe : Implications for the environment," Energy Policy, Elsevier, vol. 23(6), pages 537-553, June.
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    More about this item

    Keywords

    Carbon Emissions; Coal Subsidies; Global Warming; Greenhouse Gases; Trade and Environment;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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