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Reducing coal subsidies and trade barriers: their contribution to greenhouse gas abatement

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  • ANDERSON, KYM
  • McKIBBIN, WARWICK J.

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.
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  • ANDERSON, KYM & McKIBBIN, WARWICK J., 2000. "Reducing coal subsidies and trade barriers: their contribution to greenhouse gas abatement," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 457-481, October.
  • Handle: RePEc:cup:endeec:v:5:y:2000:i:04:p:457-481_00
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    Cited by:

    1. repec:ebl:ecbull:eb-18-00369 is not listed on IDEAS
    2. Lin, Boqiang & Li, Aijun, 2012. "Impacts of removing fossil fuel subsidies on China: How large and how to mitigate?," Energy, Elsevier, vol. 44(1), pages 741-749.
    3. Warwick J. McKibbin, 2007. "The Prime Ministerial Task Group on Emissions Trading: An Assessment," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 14(3), pages 13-18.
    4. Riker, David A., 2012. "International coal trade and restrictions on coal consumption," Energy Economics, Elsevier, vol. 34(4), pages 1244-1249.
    5. Pani, Marco & Perroni, Carlo, 2014. "Energy Subsidies and Policy Commitment in Political Equilibrium," CAGE Online Working Paper Series 208, Competitive Advantage in the Global Economy (CAGE).
    6. Djoni Hartono & Tony Irawan & Ahmad Komarulzaman, 2014. "Energy Pricing Policies in Indonesia: A Computable General Equilibrium Model," EcoMod2014 7344, EcoMod.
    7. Nora Yusma Bte Mohamed Yusoff & Hussain Ali Bekhet, 2016. "Impacts of Energy Subsidy Reforms on the Industrial Energy Structures in the Malaysian Economy: A Computable General Equilibrium Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 6(1), pages 88-97.
    8. Wesseh, Presley K. & Lin, Boqiang & Atsagli, Philip, 2016. "Environmental and welfare assessment of fossil-fuels subsidies removal: A computable general equilibrium analysis for Ghana," Energy, Elsevier, vol. 116(P1), pages 1172-1179.
    9. B Kelsey Jack & Carolyn Kousky & Katharine R E Sims, 2007. "Lessons Relearned: Can Previous Research on Incentive-Based Mechanisms Point the Way for Payments for Ecosystem Services?," CID Working Papers 15, Center for International Development at Harvard University.
    10. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    11. Warwick J. McKibbin & Peter J. Wilcoxen, 1998. "Global Emissions Trading: Prospects and Pitfalls," Economics and Environment Network Working Papers 9801, Australian National University, Economics and Environment Network.
    12. Anderson, Kym, 1998. "Are resource-abundant economies disadvantaged?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 0(Issue 1), pages 1-23.
    13. McKibbin, Warwick J., 1998. "Greenhouse abatement policy: insights from the G-cubed multi-country model," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 0(Issue 1), pages 1-15.
    14. Colyer, Dale, 2002. "Environmental Impacts Of Agricultural Trade Under Nafta," Conference Papers 19104, West Virginia University, Department of Agricultural Resource Economics.
    15. Saunders, Caroline M. & Roningen, Vernon O., 2001. "Trade And The Environment. Linking A Partial Equilibrium Trade Model With Production Systems And Their Environmental Consequences," 2001: International Trade in Livestock Products Symposium, January 2001, Auckland, New Zealand 14552, International Agricultural Trade Research Consortium.
    16. Li, Aijun & Lin, Boqiang, 2013. "Comparing climate policies to reduce carbon emissions in China," Energy Policy, Elsevier, vol. 60(C), pages 667-674.
    17. Blackman, Allen & Nelson, Per-Kristian & Mathis, Mitchell, 2001. "The Greening of Development Economics: A Survey," Discussion Papers dp-01-08, Resources For the Future.
    18. Liu, Wei & Li, Hong, 2011. "Improving energy consumption structure: A comprehensive assessment of fossil energy subsidies reform in China," Energy Policy, Elsevier, vol. 39(7), pages 4134-4143, July.
    19. repec:eee:enepol:v:110:y:2017:i:c:p:51-61 is not listed on IDEAS
    20. repec:eee:eneeco:v:71:y:2018:i:c:p:149-160 is not listed on IDEAS
    21. Warwick J. McKibbin & Peter J. Wilcoxen, 2003. "Climate Policy and Uncertainty: The Roles of Adaptation versus Mitigation," Economics and Environment Network Working Papers 0306, Australian National University, Economics and Environment Network.
    22. Riedy, Chris & Diesendorf, Mark, 2003. "Financial subsidies to the Australian fossil fuel industry," Energy Policy, Elsevier, vol. 31(2), pages 125-137, January.
    23. McKibbin, Warwick J. & Wilcoxen, Peter J., 2013. "A Global Approach to Energy and the Environment," Handbook of Computable General Equilibrium Modeling, Elsevier.
    24. repec:eee:enepol:v:115:y:2018:i:c:p:443-455 is not listed on IDEAS

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    JEL classification:

    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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