Comparing scenarios of the carbon regulation for the BRICS and EAEU economies using the GTAP-E model

The paper compares the economic effects of the introduction of a national carbon taxation and the emission trading system (ETS) between the EAEU and BRICS countries in the medium-term. We also add to this group of countries Uzbekistan, which has an observer status in the EAEU, and Turkmenistan, trade and economic partner of the EAEU. The static computable general equilibrium model GTAP-E is used. Targets for reducing emissions are formulated on the basis countries’ intermediate goals, according to the national documents under the Paris Agreement. The results of simulations show that in terms of real GDP, countries such as Belarus, Russia, Kyrgyzstan, Kazakhstan, Armenia, Brazil, and India prefer an emission trading scheme to national taxation. While for China, South Africa, Uzbekistan and Turkmenistan, participation in the ETS leads to a greater reduction in GDP. Since the second group of countries has lower abatement costs than the equilibrium carbon price under the ETS, in the ETS scenario they reduce emissions by a greater amount and sell emission permits. The analysis also shows which sectors increase production after the carbon regulation. A considerable increase in production and exports is observed in chemicals, nonferrous, ferrous metals in several BRICS and EAEU countries. Despite that these industries are energy-intensive, countries decrease emissions by reducing production in the energy sectors. These industries can be potential joint comparative advantages in the context of declining demand for traditional energy sources. The findings can be useful for the integration policy.