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Low-Carbon Development through International Specialization

Gregor Schwerhoff and Ottmar Edenhofer ()

Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: A major concern in climate negotiations is that decarbonization may signi cantly hurt the development process. This paper shows that international specialization can contribute to making environmental and economic objectives compatible. When carbon effi ciency di ffers between two trading partners, environmental policy a ffects production cost di fferentially, so that the comparative advantage in technology is endogenous. Under a global climate agreement, a universal carbon tax would shift the production of energy intensive goods towards carbon effi cient economies. Once emissions are correctly internalized, trade becomes unambiguously bene cial for the environment and allows pursuing both environmental objectives and fast economic growth. Even in the absence of a climate agreement, free trade provides the option of indirectly accessing carbon e fficient technology abroad. This improves the marginal rate of substitution between consumption and environmental quality and thus achieves emission reductions even without international cooperation.

JEL-codes: Q56 F18 H23 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:80036

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