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Energy Demand and Trade in General Equilibrium

Author

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  • Peter Egger

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  • Sergey Nigai

    ()

Abstract

This paper sheds light on the impact of alternative environmental policies on energy demand, global $${ CO}_2$$ C O 2 emissions, trade, and welfare. For this, we develop an Eaton–Kortum type general equilibrium model of international trade which includes an energy sector. We structurally estimate the key parameters of the model and calibrate it to the data on 31 OECD countries and the rest of the world in the year 2000. The model helps assessing the relative welfare effects under alternative environmental policies. We find that, when carbon spillover effects are absent, taxing energy resources as an input in energy production is preferable to taxing domestic energy production in terms of minimizing $${ CO}_2$$ C O 2 emissions. However, with negative externalities on foreign customers domestic energy output should be taxed to minimize world carbon emissions given a certain level of welfare change for all countries. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Peter Egger & Sergey Nigai, 2015. "Energy Demand and Trade in General Equilibrium," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(2), pages 191-213, February.
  • Handle: RePEc:kap:enreec:v:60:y:2015:i:2:p:191-213
    DOI: 10.1007/s10640-014-9764-1
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    References listed on IDEAS

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    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
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    Citations

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    Cited by:

    1. Mario Larch & Markus Löning & Joschka Wanner, 2017. "Can Degrowth Overcome the Leakage Problem of Unilateral Climate Policy?," CESifo Working Paper Series 6633, CESifo Group Munich.
    2. Larch, Mario & Wanner, Joschka, 2017. "Carbon tariffs: An analysis of the trade, welfare, and emission effects," Journal of International Economics, Elsevier, vol. 109(C), pages 195-213.
    3. Svetlov, Nikolai & Shishkina, Ekaterina, 2016. "Economic and Mathematical Modeling of EAEC Agri-food Policy," Working Papers 767, Russian Presidential Academy of National Economy and Public Administration.

    More about this item

    Keywords

    International trade; Energy demand; General equilibrium; Carbon spillovers; Carbon taxes; F11; F14; Q43; Q48;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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