Evaluating the Competitiveness Effects of Global Climate Change Policy

Abstract

Under the 2015 United Nations Paris Agreement, virtually every country in the world has pledged to implement domestic policies to mitigate their greenhouse gas emissions through “nationally determined contributions” or NDCs. A key concern among countries is the possibility that more stringent regulation, particular carbon pricing, in one jurisdiction will lead to a loss of industrial production—and emissions leakage—to jurisdictions with less stringent regulation. In this paper we employ a unique dataset of bilateral trade among G-20 countries over different industries, and examine how this trade varies based on importer and exporter energy prices. Change in energy prices is the main way in which climate change mitigation will affect trade. The effect is more pronounced in energy-intensive or trade-intensive manufacturing industries. Based on the CO2 prices translated from their NDCs, our simulation results suggest that, in China-US bilateral trade, the induced increase in energy prices would cause an 8.9% increase in total import flows from China to the US but a 12.1% increase from the US to China.

Zhenxuan Wang
Zhenxuan Wang
Ph.D. Candidate

My research interests lie at the intersection of environmental and energy economics, climate policy, and industrial organization.