Analyzing the Impact of Carbon Mitigation on the Eurozone’s Trade Dynamics with the US and China

Pathairat Pastpipatkul and Terdthiti Chitkasame ()
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Pathairat Pastpipatkul: Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand
Terdthiti Chitkasame: Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand

Econometrics, 2025, vol. 13, issue 3, 1-18

Abstract: This study focusses on the transmission of carbon pricing mechanisms in shaping trade dynamics between the Eurozone and key partners: the USA and China. Using Bayesian variable selection methods and a Time-Varying Structural Vector Autoregressions (TV-SVAR) model, the research identifies the key variables impacting EU carbon emissions over time. The results reveal that manufactured products from the US have a diminishing positive impact on EU carbon emissions, suggesting potential exemption from future regulations. In contrast, manufactured goods from the US and petroleum products from China are expected to increase emissions, indicating a need for stricter trade policies. These findings provide strategic insights for policymakers aiming to balance trade and environmental objectives.

Keywords: the Carbon Border Adjustment Mechanism (CBAM); Bayesian variable selection; Time Varying Structural Vector Autoregressions model (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:13:y:2025:i:3:p:28-:d:1712448

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