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Trade sanctions, financial transfers and BRIC participation in global climate change negotiations

  • Tian, Huifang
  • Whalley, John

Two effects are at issue in evaluating country incentives to participate in global carbon emission initiatives: a utility loss from reduced consumption due to reduced use of fossil fuels and a gain from lowered temperature change. The latter accrues to all countries. Own country emissions reductions are typically not in the self interest of countries and hence countries will not participate in global climate negotiations, unless the perceived damage from climate change is very large and much larger than damage estimates in the Stern review. We use Stern based damage estimates and investigate how the incentives for large population low wage rapidly growing countries in the BRIC group (Brazil, Russia, India, China) to participate in global climate change negotiations both as a sub-global coalition and individually can be affected by penalties (tariffs) inflicted or financial transfers made to them by the OECD. We assess what levels of other country trade measures linked to non-participation are needed to induce compliance as an all or nothing discrete choice. We also analyze participation linked to financial transfers. We use a general equilibrium model calibrated to a 2006-2056 base case, and capture induced changes in the global trade equilibrium in our analyses. Our results suggest that only very high tariffs of over a hundred percent by all other countries, or even higher tariffs by the OECD alone, could induce participation by BRIC countries. Equally, large financial transfers would be needed.

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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 1 (January)
Pages: 47-63

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Handle: RePEc:eee:jpolmo:v:32:y::i:1:p:47-63
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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  1. Shapley, Lloyd S & Shubik, Martin, 1969. "On the Core of an Economic System with Externalities," American Economic Review, American Economic Association, vol. 59(4), pages 678-84, Part I Se.
  2. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
  3. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, June.
  4. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  5. Herbert E. Scarf, 1965. "The Core of an N Person Game," Cowles Foundation Discussion Papers 182R, Cowles Foundation for Research in Economics, Yale University.
  6. Huifang Tian & John Whalley, 2008. "China's Participation in Global Environmental Negotiations," NBER Working Papers 14460, National Bureau of Economic Research, Inc.
  7. Cai, Yuezhou & Riezman, Raymond & Whalley, John, 2013. "International trade and the negotiability of global climate change agreements," Economic Modelling, Elsevier, vol. 33(C), pages 421-427.
  8. Liang, Qiao-Mei & Fan, Ying & Wei, Yi-Ming, 2007. "Carbon taxation policy in China: How to protect energy- and trade-intensive sectors?," Journal of Policy Modeling, Elsevier, vol. 29(2), pages 311-333.
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  10. Hirofumi Uzawa, 1999. "Global warming as a cooperative game," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 2(1), pages 1-37, March.
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