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Asymmetric industrial energy prices and international trade

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  • Sato, Misato
  • Dechezlepretre, Antoine

Abstract

This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a panel for the period 1996–2011 including 42 countries, 62 sectors and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a €40-65/tCO2 price of carbon in the EU ETS would increase Europe’s imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.

Suggested Citation

  • Sato, Misato & Dechezlepretre, Antoine, 2015. "Asymmetric industrial energy prices and international trade," LSE Research Online Documents on Economics 63634, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:63634
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    File URL: http://eprints.lse.ac.uk/63634/
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    Cited by:

    1. de Miguel, Carlos & Labandeira, Xavier & Löschel, Andreas, 2015. "Frontiers in the economics of energy efficiency," Energy Economics, Elsevier, vol. 52(S1), pages 1-4.
    2. repec:spr:epolit:v:35:y:2018:i:1:d:10.1007_s40888-017-0074-2 is not listed on IDEAS
    3. Sebastian Breuer & Jens Klose, 2015. "Who Gains From Nominal Devaluation? An Empirical Assessment of Euro-area Exports and Imports," The World Economy, Wiley Blackwell, vol. 38(12), pages 1966-1989, December.
    4. Sakamoto, Tomoyuki & Managi, Shunsuke, 2017. "New evidence of environmental efficiency on the export performance," Applied Energy, Elsevier, vol. 185(P1), pages 615-626.
    5. repec:eee:eneeco:v:69:y:2018:i:c:p:379-394 is not listed on IDEAS
    6. Karsten Neuhoff & Roland Ismer & William Acworth & Andrzej Ancygier & Carolyn Fischer & Manuel Haussner & Hanna-Liisa Kangas & Yong-Gun Kim & Clayton Munnings & Anne Owen & Stephan Pauliuk & Oliver Sa, 2016. "Eine Option für den Emissionshandel nach 2020: Einbeziehung des Konsums emissionsintensiver Materialien; Ergebnisse eines Forschungsprojektes des Netzwerkes Climate Strategies," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 111, number pbk111, November.
    7. Kaltenegger, Oliver & Löschel, Andreas & Baikowski, Martin & Lingens, Jörg, 2017. "Energy costs in Germany and Europe: An assessment based on a (total real unit) energy cost accounting framework," Energy Policy, Elsevier, vol. 104(C), pages 419-430.
    8. Misato Sato & Gregor Singer & Damien Dussaux & Stefania Lovo, 2015. "International and sectoral variation in energy prices 1995-2011: how does it relate to emissions policy stringency?," GRI Working Papers 187, Grantham Research Institute on Climate Change and the Environment.
    9. Grégoire Garsous & Tomasz Kozluk, 2017. "Foreign Direct Investment and The Pollution Haven Hypothesis: Evidence from Listed Firms," OECD Economics Department Working Papers 1379, OECD Publishing.

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    Keywords

    energy prices; international trade; carbon taxes;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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