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Asymmetric industrial energy prices and international trade

Listed author(s):
  • Sato, Misato
  • Dechezleprêtre, Antoine

This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a rich panel dataset with 42 countries, 62 manufacturing sectors over 16 years (1996–2011) and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors, however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a €40–65/tCO2 price of carbon in the EU ETS would increase Europe's imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 52 (2015)
Issue (Month): S1 ()
Pages: 130-141

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Handle: RePEc:eee:eneeco:v:52:y:2015:i:s1:p:s130-s141
DOI: 10.1016/j.eneco.2015.08.020
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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