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The impact of decarbonization on trade

Author

Listed:
  • Bekkers, Eddy
  • Yilmaz, Ayse Nihal
  • Métivier, Jeanne
  • Tresa, Enxhi
  • Iunius, Lory
  • Xu, Ankai

Abstract

In this paper we explore the impact of decarbonization on international trade and development employing a recursive dynamic Computable General Equilibrium (CGE). We develop three long run stylized climate change scenarios: (i) Global Inaction (GI); (ii) Divided World (DW); and (iii) Cooperation towards Net Zero (CNZ). The CNZ scenario encompasses comprehensive measures resulting in a significant reduction in emissions to approximately 10 billion tons by 2050, contrasting with escalating emissions under GI and stagnation under DW. The analysis shows that the share of energy trade in total trade would fall substantially in CNZ, from 11% to 3%. Furthermore, the share of energy exported falls drastically since electricity is less tradable than fossil fuels. Exports of fossil fuel dependent countries will shift from fossil fuels to emission intensive trade exposed sectors and sophisticated manufacturing.

Suggested Citation

  • Bekkers, Eddy & Yilmaz, Ayse Nihal & Métivier, Jeanne & Tresa, Enxhi & Iunius, Lory & Xu, Ankai, 2025. "The impact of decarbonization on trade," WTO Staff Working Papers ERSD-2025-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:330671
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment

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