The impact of decarbonization on trade

Eddy Bekkers, Ayse Nihal Yilmaz, Jeanne Métivier, Enxhi Tresa, Lory Iunius and Ankai Xu

No ERSD-2025-08, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

Abstract: In this paper we explore the impact of decarbonization on international trade and development employing a recursive dynamic Computable General Equilibrium (CGE). We develop three long run stylized climate change scenarios: (i) Global Inaction (GI); (ii) Divided World (DW); and (iii) Cooperation towards Net Zero (CNZ). The CNZ scenario encompasses comprehensive measures resulting in a significant reduction in emissions to approximately 10 billion tons by 2050, contrasting with escalating emissions under GI and stagnation under DW. The analysis shows that the share of energy trade in total trade would fall substantially in CNZ, from 11% to 3%. Furthermore, the share of energy exported falls drastically since electricity is less tradable than fossil fuels. Exports of fossil fuel dependent countries will shift from fossil fuels to emission intensive trade exposed sectors and sophisticated manufacturing.

Keywords: decarbonisation policies; net zero; energy trade; diversification (search for similar items in EconPapers)
JEL-codes: F13 F18 F64 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-ene, nep-env, nep-int, nep-inv and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wtowps:330671

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