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Carbon Motivated Regional Trade Arrangements: Analytics and Simulations

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  • Yan Dong
  • John Whalley

Abstract

This paper presents both analytics and numerical simulation results relevant to proposals for carbon motivated regional trade agreements summarized in Dong & Whalley(2008). 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14880.

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Date of creation: Apr 2009
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Publication status: published as Dong, Yan & Whalley, John, 2011. "Carbon motivated regional trade arrangements: Analytics and simulations," Economic Modelling, Elsevier, vol. 28(6), pages 2783-2792.
Handle: RePEc:nbr:nberwo:14880

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  1. Cai, Yuezhou & Riezman, Raymond & Whalley, John, 2013. "International trade and the negotiability of global climate change agreements," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 421-427.
  2. Yan Dong & John Whalley, 2008. "Carbon, Trade Policy, And Carbon Free Trade Areas," Trade Working Papers 22730, East Asian Bureau of Economic Research.
  3. Ben Lockwood & John Whalley, 2010. "Carbon-motivated Border Tax Adjustments: Old Wine in Green Bottles?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 33(6), pages 810-819, 06.
  4. Riezman, Raymond, 1979. "A 3 x 3 model of customs unions," Journal of International Economics, Elsevier, Elsevier, vol. 9(3), pages 341-354, August.
  5. Bhattacharyya, Subhes C., 1996. "Applied general equilibrium models for energy studies: a survey," Energy Economics, Elsevier, Elsevier, vol. 18(3), pages 145-164, July.
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Cited by:
  1. 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.
  2. ZhongXiang Zhang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," Working Papers, Fondazione Eni Enrico Mattei 2012.80, Fondazione Eni Enrico Mattei.
  3. 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.
  4. Yan Dong & John Whalley, 2008. "Carbon, Trade Policy, and Carbon Free Trade Areas," NBER Working Papers 14431, National Bureau of Economic Research, Inc.
  5. Yan Dong & John Whalley, 2011. "Optimal tariff calculations in tariff games with climate change considerations," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(15), pages 1431-1435.
  6. Qin Bao & Ling Tang & ZhongXiang Zhang & Han Qiao & Shouyang Wang, 2011. "Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model," Working Papers, Fondazione Eni Enrico Mattei 2011.93, Fondazione Eni Enrico Mattei.
  7. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2013. "Carbon-based Border Tax Adjustments and China's International Trade: Analysis based on a Dynamic Computable General Equilibrium Model," CCEP Working Papers, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University 1301, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  8. Dong, Yan & Whalley, John, 2012. "Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents," Journal of Policy Modeling, Elsevier, Elsevier, vol. 34(1), pages 49-63.

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