Trade under the Paris agreement: Do global value chains hinder climate change mitigation?

Climate change policies are ment to reduce emissions, setting emission targets for the coming decade. It is well known that the impacts of trade on climate change are ambiguous. On the one hand, increased production leads ceteris paribus to increased emissions (scale effect). On the other hand, trade induces a change in the production specialization (composition effect) that can result either in positive or in negative impacts, depending on the emission intensity of the newly produced goods. To propose a quantitative answer, we tailored the applied general equilibrium model MIRAGE-e to (i) account for global value chains by separating trade in goods for final consumption and trade in intermediates, including their respective tariffs and non-tariff trade costs, (ii) encompass the emissions of five different greenhouse gas and (iii) represent international transportation by mode. Using this framework, we simulate several trade agreements, all taking into account the constraints imposed by the Nationally Determined Contributions of the Paris Agreement. The unlikely scenario of a global trade liberalization has the advantage to produce large impacts, to illustrate the different effects linking international trade and climate change and ease their decomposition, while scenarios based on existing or potential trade policies or agreements illustrate the diversity in the issues related to the specificities of each trade policy.