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1. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of these taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China's manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 8 percent; the corresponding declines in real income would be 3.7 percent and 2.4 percent. In contrast, border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries without seriously damaging developing-country trade. Therefore, as part of a comprehensive agreement on climate change, new WTO rules could be negotiated that would prohibit the extreme form of action while possibly allowing trade actions based on domestic carbon content as a safety valve.
Topic:
Climate Change, Environment, International Trade and Finance, and Treaties and Agreements
Political Geography:
China

2. Can Global De-Carbonization Inhibit Developing-Country Industrialization?

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. We depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, we 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.
Topic:
Climate Change, Development, and Economics
Political Geography:
China, India, and Brazil

3. Energy Needs and Efficiency, Not Emissions: Re-framing the Climate Change Narrative

Author:
Nancy Birdsall and Arvind Subramanian
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The basic narrative on climate change between the rich and poor worlds has been problematic. The focus on emissions has made industrial countries inadequately sensitive to the unmet energy needs in developing countries. And it has led developing countries to adopt the rhetoric of recrimination and focus on the legacy of historical emissions by industrial countries. The ensuing blame game has led to the current gridlock. As a way out, we suggest some simple principles for determining equitable distribution of emission cuts between developed and developing countries to meet global targets. These principles emphasize basic energy needs and the equality of access to energy opportunities rather than emissions, taking account of development levels, as well as energy efficiency in creating such opportunities. To apply these principles, we develop a new data set to distinguish between energy needs and emissions-intensity for major developing and developed-country emitters and quantify the relationship between these variables and changes in income (or development). This quantification allows us to project emissions levels in 2050. Our main finding is that meeting global emissions targets equitably requires very large, probably revolutionary, improvements in the carbon intensity of production and consumption, much larger than seen historically. We conclude that a new shared narrative that places equality of energy opportunities at the forefront would naturally shift the focus of international cooperation from allocating emissions “rights” or reductions and blame to maximizing efforts to achieving technology gains and rapidly transferring them worldwide. Abandoning the setting of emissions targets for developing counries and creating instead a framework where all countries contribute to maximizing technology creation and diffusion is what Copenhagen should be about.
Topic:
Climate Change, Energy Policy, Environment, and Treaties and Agreements

4. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
Topic:
Climate Change, Economics, Energy Policy, Environment, and International Trade and Finance
Political Geography:
China