Carbon, Trade Policy, and Carbon Free Trade Areas
AbstractThis paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for next several decades will be growth more so than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and nontradables. We also note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arises. We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti-competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14431.
Date of creation: Oct 2008
Date of revision:
Publication status: published as Yan Dong & John Whalley, 2010. "Carbon, Trade Policy and Carbon Free Trade Areas," The World Economy, Blackwell Publishing, vol. 33(9), pages 1073-1094, 09.
Note: EEE ITI
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- F18 - International Economics - - Trade - - - Trade and Environment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-28 (All new papers)
- NEP-ENE-2008-10-28 (Energy Economics)
- NEP-ENV-2008-10-28 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Whalley, John, 1979. "Uniform domestic tax rates, trade distortions and economic integration," Journal of Public Economics, Elsevier, vol. 11(2), pages 213-221, March.
- Nadim Ahmad & Andrew Wyckoff, 2003. "Carbon Dioxide Emissions Embodied in International Trade of Goods," OECD Science, Technology and Industry Working Papers 2003/15, OECD Publishing.
- Ben Lockwood & John Whalley, 2008.
"Carbon Motivated Border Tax Adjustments: Old Wine in Green Bottles?,"
NBER Working Papers
14025, National Bureau of Economic Research, Inc.
- Ben Lockwood & John Whalley, 2010. "Carbon-motivated Border Tax Adjustments: Old Wine in Green Bottles?," The World Economy, Wiley Blackwell, vol. 33(6), pages 810-819, 06.
- Dong, Yan & Whalley, John, 2011.
"Carbon motivated regional trade arrangements: Analytics and simulations,"
Elsevier, vol. 28(6), pages 2783-2792.
- Yan Dong & John Whalley, 2009. "Carbon Motivated Regional Trade Arrangements: Analytics and Simulations," NBER Working Papers 14880, National Bureau of Economic Research, Inc.
- John Whalley, 2008.
"Recent Regional Agreements: Why So Many, Why So Much Variance in Form, Why Coming So Fast, and Where Are They Headed?,"
The World Economy,
Wiley Blackwell, vol. 31(4), pages 517-532, 04.
- John Whalley, 2006. "Recent Regional Agreements: Why so many, why so much Variance in Form, why Coming so fast, and where are they Headed?," CESifo Working Paper Series 1790, CESifo Group Munich.
- Gary Clyde Hufbauer & Carol Gabyzon, 1996.
"Fundamental Tax Reform and Border Tax Adjustments,"
Peterson Institute Press: Policy Analyses in International Economics,
Peterson Institute for International Economics, number pa43, November.
- Piggott, John & Whalley, John & Wigle, Randall, 1993. "How large are the incentives to join subglobal carbon-reduction initiatives?," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 473-490.
- Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October.
- Nicole A. MATHYS & Jaime de MELO, 2011.
"The Political Economy of Climate Change Policies: Political Economy Aspects of Climate Change Mitigation Efforts,"
- Nicole A. MATHYS & Jaime de MELO, 2011. "The Political Economy of Climate Change Policies: Political Economy Aspects of Climate Change Mitigation Efforts," Working Papers P24, FERDI.
- Yan Dong & John Whalley, 2009. "A Third Benefit of Joint Non-OPEC Carbon Taxes: Transferring OPEC Monopoly Rent," CESifo Working Paper Series 2741, CESifo Group Munich.
- Alessandro Antimiani & Valeria Costantini & Chiara Martini & Luca Salvatici, 2011. "Cooperative and non-cooperative solutions to carbon leakage," Departmental Working Papers of Economics - University 'Roma Tre' 0136, Department of Economics - University Roma Tre.
- Wim Naudé, 2011.
"Climate Change and Industrial Policy,"
2011/03, Maastricht School of Management.
- Nicole A. MATHYS & Jaime de MELO, 2012.
"Reconciling Trade and Climate Policies,"
- Yan Dong & John Whalley, 2009.
"Carbon Motivated Regional Trade Arrangements: Analytics and Simulations,"
NBER Working Papers
14880, National Bureau of Economic Research, Inc.
- Dong, Yan & Whalley, John, 2011. "Carbon motivated regional trade arrangements: Analytics and simulations," Economic Modelling, Elsevier, vol. 28(6), pages 2783-2792.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.