Can Global De-Carbonization Inhibit Developing-Country Industrialization?

Aaditya Mattoo, Arvind Subramanian, Dominique van der Mensbrugghe () and Jianwu He

No 188, Working Papers from 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.

Keywords: trade; environment; climate change; emissions trading (search for similar items in EconPapers)
JEL-codes: F13 F18 H23 Q56 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-11
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Can Global De-Carbonization Inhibit Developing Country Industrialization? (2012)
Working Paper: Can Global De-Carbonization Inhibit Developing Country Industrialization? (2010)
Working Paper: Can global de-carbonization inhibit developing country industrialization ? (2009)
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