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Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry

Anders Hammer Strømman, Edgar G. Hertwich and Faye Duchin
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Anders Hammer Strømman: Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program H¿yskoleringen 5, 7491 Trondheim, Norway
Edgar G. Hertwich: Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program Høyskoleringen 5, 7491 Trondheim, Norway

Rensselaer Working Papers in Economics from Rensselaer Polytechnic Institute, Department of Economics

Abstract: This paper investigates how changes in the international division of labor can contribute to reducing CO2 emissions. The mitigation potential and costs implied by this mechanism are analyzed. Implications for the aluminium sector are assessed, including changes in the price of aluminium when global carbon emissions are constrained and the constraints are progressively tightened. The analysis makes use of the World Trade Model with Bilateral Trade (WTMBT), a linear program based on comparative advantage with any number of goods, factors, and regional trade partners. Minimizing factor use, WTMBT determines regional production, bilateral trade patterns, and region-specific prices. The model is extended for this study through the application of multi-objective optimization techniques and is used to explore efficient trade-offs between reducing CO2 emissions and increasing global factor costs. This application demonstrates how the WTMBT, with its global scope and regional and sectoral production detail, can be used to build bridges between global objectives and concerns about a specific industry in specific regions. This capability can extend the reach of more traditional studies in industrial ecology.

JEL-codes: F18 C61 C67 Q56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-res
Date: 2005-06
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