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The Effect of Trade Liberalisation on Carbon Leakage Under the Kyoto Protocol: Experiments with GTAP-E

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  • Kuik, Onno

Abstract

A group of industrialised countries and countries with economies in transition have agreed to reduce their emissions of greenhouse gases under the Kyoto Protocol of the United Nations Framework Convention on Climate Change. Because of impacts on international trade and investments, the emission reduction policies of these countries - the so-called Annex I countries - could lead to loss of competitiveness and carbon leakage. In the context CO2 reduction policies, changes in import tariffs and other trade barriers have received little attention in the literature. This paper presents quantitative estimations of the impacts of the implementation of the Kyoto agreements on carbon leakage with and without freer trade. The calculations are made with a static, multisector, multiregion applied general equilibrium model (GTAP-E) that allows for inter-fuel and interfactor substitutions. We find that under a plausible range of assumptions, the implementation of the Uruguay Round reductions of import tariffs a) increases the rate of carbon leakage by around 3 percent-points, but b) does not reduce the competitiveness of energy-intensive industries in Annex 1 countries.

Suggested Citation

  • Kuik, Onno, 2001. "The Effect of Trade Liberalisation on Carbon Leakage Under the Kyoto Protocol: Experiments with GTAP-E," Conference papers 330955, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330955
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    References listed on IDEAS

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    1. Warwick J. McKibbin & Martin T. Ross & Robert Shackleton & Peter J. Wilcoxen, 1999. "Emissions Trading, Capital Flows and the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 287-333.
    2. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2000. "Carbon Emission Leakages: A General Equilibrium View," OECD Economics Department Working Papers 242, OECD Publishing.
    3. Babiker, Mustafa H., 2001. "Subglobal climate-change actions and carbon leakage: the implication of international capital flows," Energy Economics, Elsevier, vol. 23(2), pages 121-139, March.
    4. Alan S. Manne & Richard G. Richels, 1999. "The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-23.
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