Climate Change and International Trade: Towards a Causal Analysis of Carbon Leakage
Final Report Abstract
The purpose of this project was to advance the empirical analysis of the international repercussions of national climate policies. The central policy motivation for this work is that national emission savings may be offset by increased emissions abroad when national economies adjust by cutting down domestic production (and, hence, emissions), without reducing the emission content of domestic absorption (consumption and investment). This project addresses the scarcity of empirical work on this question. The main insights are: (i) The carbon footprint of nations differs substantially from domestic carbon emissions. The difference is due to international trade. Across countries, climate policy commitments under the Kyoto Protocol have reduced domestic emissions, but not the footprints. This implies that domestic emission savings have been offset by higher emissions abroad. (ii) The Kyoto Protocol has affected domestic emissions through economic policies. Countries with binding commitments have stepped up fuel prices and altered their energy mixes. (iii) Kyoto commitments have affected the pattern of international trade. Countries with commitments have reduced their exports of carbon intensive goods to non-committed countries and have increased their imports of such goods from non-committed countries. The policy conclusions are: (i) The success of countries in tackling global warming should not alone be measured by domestic carbon dioxide emissions but also by changes in the carbon footprint, which accounts for emissions caused by domestic absorptive behavior abroad. (ii) As the global economy becomes ever more integrated by international trade, unilateral climate policies become less and less effective and a comprehensive, truly global framework for carbon pricing becomes ever more crucial. (iii) To the extent that international climate negotiations fail to cover emissions of all relevant countries in the global economy, the effectiveness of unilateral climate policy is indeed reduced by climate leakage. This problem can be mitigated by including the carbon content of imported goods into domestic carbon taxes (or into the trade of carbon emission permits), while exempting exports from domestic carbon policies. Further research is required along several lines. (i) Measures of the CO2 footprint of nations should be further improved. One central concern lies in the use of proportionality assumptions in the construction of global input-output tables. Firm-level import and export statistics could be used to improve the data. (ii) International trade requires transportation, which is a carbon intensive activity. However, in the existing data sources, emissions from international transportation cannot be allocated to individual countries. This puts substantial limits on the existing estimates of the carbon emission consequences of lower trade barriers. (iii) So far, the literature has been mostly concerned with the estimation of local average treatment effects of climate policies (or Kyoto commitments) on trade flows. To measure the general equilibrium effects of national climate policies, one would need to embed these estimates into general equilibrium models and to simulate counterfactual situations featuring different climate or trade policies. 17.11.2011, Die importierten Emissionen. Handelsblatt 23.11.2011, Ifo Studie: Ziele des Kyoto-Protokolls wurden komplett verfehlt, Handelsblatt (auch Wirtschaftswoche Online) 02.12.2011, Wohlstandsländer verschmutzen Chinas und Indiens Luft, Zeit Online 07.12.2011, Wenn Ökoträumer aufwachen. Financial Times Deutschland 24.09.2012, Klimazölle können der Umwelt schaden. Die Zeit
Publications
- "The Effect of the Kyoto Protocol on Carbon Emissions", Journal of Policy Analysis and Management 32 (4), 2013, 731–757
Aichele, Rahel und Gabriel Felbermayr
- "Kyoto and the Carbon Footprint of Nations", Journal of Environmental Economics and Management 63 (3), 2012, 336-354
Aichele, Rahel und Gabriel Felbermayr
- "Estimating the effects of Kyoto on bilateral trade flows using matching econometrics", The World Economy 36 (3), 2013, 303-330
Aichele, Rahel und Gabriel Felbermayr
- „Trade, Climate Policy and Carbon Leakage - Theory and Empirical Evidence“, ifo Beiträge zur Wirtschaftsforschung 49, ifo Institut, 2013 (Dissertation)
Aichele, Rahel
