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Carbon Motivated Regional Trade Arrangements: Analytics and Simulations

  • Yan Dong
  • John Whalley

This paper presents both analytics and numerical simulation results relevant to proposals for carbon motivated regional trade agreements summarized in Dong & Whalley(2008). Unlike traditional regional trade agreements, by lowing tariffs on participant's low carbon emission goods and setting penalties on outsiders to force them to join such agreements , carbon motivated regional trade agreements reflect an effective merging of trade and climate change regimes, and are rising in profile as part of the post 2012 Copenhagen UNFCC negotiation. By adding country energy extraction cost functions, we develop a multi-region general equilibrium structure with endogenously determined energy supply. We calibrate our model to business as usual scenarios for the period 2006-2036. Our results show that carbon motivated regional agreements can reduce global emissions, but the effect is very small and even with penalty mechanisms used, the effects are still small. This supports the basic idea in our previous policy paper that trade policy is likely to be a relatively minor consideration in climate change containment.

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File URL: http://www.nber.org/papers/w14880.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14880.

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Date of creation: Apr 2009
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Publication status: published as Dong, Yan & Whalley, John, 2011. "Carbon motivated regional trade arrangements: Analytics and simulations," Economic Modelling, Elsevier, vol. 28(6), pages 2783-2792.
Handle: RePEc:nbr:nberwo:14880
Note: EEE
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Yuezhou Cai & Raymond Riezman & John Whalley, 2009. "International Trade and the Negotiability of Global Climate Change Agreements," NBER Working Papers 14711, National Bureau of Economic Research, Inc.
  2. Bhattacharyya, Subhes C., 1996. "Applied general equilibrium models for energy studies: a survey," Energy Economics, Elsevier, vol. 18(3), pages 145-164, July.
  3. Yan Dong & John Whalley, 2008. "Carbon, Trade Policy, and Carbon Free Trade Areas," NBER Working Papers 14431, National Bureau of Economic Research, Inc.
  4. Ben Lockwood & John Whalley, 2008. "Carbon Motivated Border Tax Adjustments: Old Wine in Green Bottles?," NBER Working Papers 14025, National Bureau of Economic Research, Inc.
  5. Riezman, Raymond, 1979. "A 3 x 3 model of customs unions," Journal of International Economics, Elsevier, vol. 9(3), pages 341-354, August.
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