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Can global de-carbonization inhibit developing country industrialization ?

Author

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  • Mattoo, Aaditya
  • Subramanian, Arvind
  • van der Mensbrugghe, Dominique
  • He, Jianwu

Abstract

Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. The authors depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, they decompose the impact of an agreement on emissions reductions into three components: the change in the price of carbon due to each country’s emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are not adversely affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 6-7 percent and manufacturing exports by 9-11 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the Dutch disease effects of transfers hurt exports most. If the growth costs of these structural changes are judged to be substantial, the current policy consensus, which favors emissions tradability (on efficiency grounds) supplemented with financial transfers (on equity grounds), needs re-consideration.

Suggested Citation

  • Mattoo, Aaditya & Subramanian, Arvind & van der Mensbrugghe, Dominique & He, Jianwu, 2009. "Can global de-carbonization inhibit developing country industrialization ?," Policy Research Working Paper Series 5121, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5121
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    References listed on IDEAS

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    Cited by:

    1. Pauline Lacour & Jean-Christophe Simon, 2012. "Les avancées du Mécanisme de Développement Propre : une étape décisive vers un développement "décarboné" au Sud ?," Post-Print halshs-00713067, HAL.

    More about this item

    Keywords

    Climate Change Mitigation and Green House Gases; Climate Change Economics; Environment and Energy Efficiency; Energy and Environment; Carbon Policy and Trading;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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