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Exchanging Goods and Damages: The Role of Trade on the Distribution of Climate Change Costs

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  • Oliver Schenker

Abstract

The impacts of climate change vary significantly across world regions. Whereas tropical and subtropical regions are expected to suffer severely from the effects of climate change, the impacts in northern latitudes should remain relatively moderate. However, regions are not self-sufficient, and the costs of climate change can spread across regions through international trade. I study the international spillover of climate impacts within a regionalised, climate-sensitive, dynamic computable general equilibrium model of the world economy. Using data from a global climate model shows that the world regions face welfare losses between 0.6 and 2.1 % due to climate change. I also show that climate change affects terms of trade and sectoral competitiveness. By means of a decomposition method, the extent of spillover impacts through international trade can be identified. Spillover impacts significantly affect, either positively or negatively, the total costs of climate change for a region. For regions with low exposure to climate change and high adaptive capacities, spillover effects are responsible for a 1/6 of the total cost of climate change. Copyright Springer Science+Business Media B.V. 2013

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  • Oliver Schenker, 2013. "Exchanging Goods and Damages: The Role of Trade on the Distribution of Climate Change Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 261-282, February.
    • Handle: RePEc:kap:enreec:v:54:y:2013:i:2:p:261-282
    DOI: 10.1007/s10640-012-9593-z
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    1. Oliver Schenker & Daniel Osberghaus, 2025. "International Trade and the Transmission of Temperature Shocks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(4), pages 965-1007, April.
    2. Fanny Groundstroem & Sirkku Juhola, 2019. "A framework for identifying cross-border impacts of climate change on the energy sector," Environment Systems and Decisions, Springer, vol. 39(1), pages 3-15, March.
    3. Huai Deng & Huan Wu & Hui Xu, 2025. "Social cost of carbon under endogenous social adaptation," Climatic Change, Springer, vol. 178(4), pages 1-20, April.
    4. Yingying Lu & David I. Stern, 2016. "Substitutability and the Cost of Climate Mitigation Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(1), pages 81-107, May.
    5. Nina Knittel & Martin W. Jury & Birgit Bednar-Friedl & Gabriel Bachner & Andrea K. Steiner, 2020. "A global analysis of heat-related labour productivity losses under climate change—implications for Germany’s foreign trade," Climatic Change, Springer, vol. 160(2), pages 251-269, May.
    6. Karine Constant & Marion Davin, 2019. "Unequal Vulnerability to Climate Change and the Transmission of Adverse Effects Through International Trade," Post-Print hal-04215353, HAL.
    7. Karine Constant & Marion Davin, 2019. "Unequal Vulnerability to Climate Change and the Transmission of Adverse Effects Through International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 727-759, October.
    8. Sandy Dall'Erba & Zhangliang Chen & Noé J. Nava, 2021. "U.S. Interstate Trade Will Mitigate the Negative Impact of Climate Change on Crop Profit," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1720-1741, October.
    9. Ajewole, Kayode & Sabala, Ethan & Beckman, Jayson, 2025. "Evaluating the Impacts of Projected Yield Changes on India’s Wheat and Rice Markets," Economic Research Report 356543, United States Department of Agriculture, Economic Research Service.
    10. Osberghaus, Daniel, 2019. "The effects of natural disasters and weather variations on international trade: A review of the empirical literature," ZEW Discussion Papers 19-002, ZEW - Leibniz Centre for European Economic Research.
    11. Schenker, Oliver & Stephan, Gunter, 2014. "Give and take: How the funding of adaptation to climate change can improve the donor's terms-of-trade," Ecological Economics, Elsevier, vol. 106(C), pages 44-55.
    12. Mo, Taejun & Dall’erba, Sandy, 2025. "Uncovering the Key Bilateral Trade Linkages in the U.S. Domestic Food Supply Chain through Disruption Simulations," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361042, Agricultural and Applied Economics Association.
    13. Osberghaus, Daniel, 2019. "The Effects of Natural Disasters and Weather Variations on International Trade and Financial Flows: a Review of the Empirical Literature," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 3, pages 305-325.

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