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Low-Carbon Development through International Specialization

Author

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  • Schwerhoff, Gregor
  • Edenhofer, Ottmar

Abstract

A major concern in climate negotiations is that decarbonization may signi cantly hurt the development process. This paper shows that international specialization can contribute to making environmental and economic objectives compatible. When carbon effi ciency di ffers between two trading partners, environmental policy a ffects production cost di fferentially, so that the comparative advantage in technology is endogenous. Under a global climate agreement, a universal carbon tax would shift the production of energy intensive goods towards carbon effi cient economies. Once emissions are correctly internalized, trade becomes unambiguously bene cial for the environment and allows pursuing both environmental objectives and fast economic growth. Even in the absence of a climate agreement, free trade provides the option of indirectly accessing carbon e fficient technology abroad. This improves the marginal rate of substitution between consumption and environmental quality and thus achieves emission reductions even without international cooperation.

Suggested Citation

  • Schwerhoff, Gregor & Edenhofer, Ottmar, 2013. "Low-Carbon Development through International Specialization," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80036, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:80036
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    References listed on IDEAS

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    Cited by:

    1. Schöler Klaus, 2013. "Irrwege der Klimapolitik – Anmerkungen aus volkswirtschaftlicher Sicht / Wrong Tracks of Climate Policy – Notes from an Economic Point of view," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 64(1), pages 275-288, January.

    More about this item

    JEL classification:

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

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