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Carbon policy and the structure of global trade

Author

Listed:
  • Christoph Böhringer

    (University of Oldenburg, Department of Economics)

  • Edward J. Balistreri

    (Colorado School of Mines, USA)

  • Thomas F. Rutherford

    (University of Wisconsin; USA)

Abstract

Alternative perspectives on the structure of international trade have important implications for the evaluation of climate policy. In this paper we assess climate policy in the context of three important alternative trade formulations. First is a Heckscher-Ohlin model based on trade in homogeneous products, which establishes the traditional neoclassical view on comparative advantage. Second is an Armington model based on regionally differentiated goods, which constitutes a popular specifcation for numerical simulations of trade policy. Third is a Melitz model based on monopolistic-competition and firm heterogeneity. This heterogeneous-firms framework is adopted in many contemporary theoretic and empirical investigations in international trade. As we show in this paper, the three alternative trade formulations have important implications for the assessment of climate policy with respect to competitive effects for energy-intensive production (and hence carbon leakage) as well as the transmission of policy burdens across countries.

Suggested Citation

  • Christoph Böhringer & Edward J. Balistreri & Thomas F. Rutherford, 2015. "Carbon policy and the structure of global trade," Working Papers V-383-15, University of Oldenburg, Department of Economics, revised May 2015.
    • Handle: RePEc:old:dpaper:383
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    2. Zhang, Chonghui & Bai, Chen & Su, Weihua & Balezentis, Tomas, 2024. "The centralised data envelopment analysis model integrated with cost information and utility theory for power price setting under carbon peak strategy at the firm-level," Energy, Elsevier, vol. 292(C).
    3. Ambec, Stefan & Esposito, Federico & Pacelli, Antonia, 2024. "The economics of carbon leakage mitigation policies," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    4. Böhringer, Christoph & Peterson, Sonja & Rutherford, Thomas F. & Schneider, Jan & Winkler, Malte, 2021. "Climate policies after Paris: Pledge, trade, and recycle. Insights from the 36th Energy Modeling Forum study (EMF36)," Kiel Working Papers 2183, Kiel Institute for the World Economy.
    5. Wang, Xiaoxi & Dietrich, Jan P. & Lotze-Campen, Hermann & Biewald, Anne & Stevanović, Miodrag & Bodirsky, Benjamin L. & Brümmer, Bernhard & Popp, Alexander, 2020. "Beyond land-use intensity: Assessing future global crop productivity growth under different socioeconomic pathways," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    6. George David Banks & Timothy Fitzgerald, 2020. "A sectoral approach allows an artful merger of climate and trade policy," Climatic Change, Springer, vol. 162(2), pages 165-173, September.
    7. Wenting Cheng, 2023. "The green investment principles: from a nodal governance perspective," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 23(3), pages 373-393, September.
    8. Edward Balistreri & Christoph Boehringer & Thomas Rutherford, 2025. "Quantifying Disruptive Trade Policies," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 10(1), pages 1-49, June.
    9. Böhringer, Christoph & Peterson, Sonja & Rutherford, Thomas F. & Schneider, Jan & Winkler, Malte, 2021. "Climate policies after Paris: Pledge, Trade and Recycle," Energy Economics, Elsevier, vol. 103(C).
    10. Vrontisi, Zoi & Charalampidis, Ioannis & Paroussos, Leonidas, 2020. "What are the impacts of climate policies on trade? A quantified assessment of the Paris Agreement for the G20 economies," Energy Policy, Elsevier, vol. 139(C).
    11. Amit Roy, 2025. "Does carbon tax promote green trade and comparative advantages: evidence from Panel Difference-In-Difference (DID) causal experiment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 27(2), pages 331-352, April.
    12. Duan, Yuwan & Ji, Ting & Lu, Yi & Wang, Siying, 2021. "Environmental regulations and international trade: A quantitative economic analysis of world pollution emissions," Journal of Public Economics, Elsevier, vol. 203(C).

    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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