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The Impacts of the Trade and Factor Market Liberalization on the Carbon Abatement Policies in the Enlargement of European Union

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  • Aydin, Levent

Abstract

This paper aims to analyze the macroeconomic impact of eastward European Union enlargement, in two contexts: first, that of reduced carbon abatement targets; and second via liberalized trade and labor mobility. The European Union, being one of the Annex-1 parties to the Kyoto Protocol, has expanded to incorporate first wave countries (Czech Republic, Estonia, Hungary, Poland, Slovenia, Malta, Cyprus) and second wave countries (Bulgaria, Latvia, Lithuania, Romania, Slovakia), from Central and Eastern European Countries, since 2004. The EU-15 bubble target would remain the same, but will adjust itself to the new burden sharing 8% target for the enlarged bubble, by using emission transfers. While the marginal abatement cost of EU-15 has been estimated above 35 USD per ton of carbon, the same cost in accession countries has been estimated to be very low. This paper examines the costs of implementing the Kyoto Protocol (with and without flexibility mechanisms), in terms of the utility for the representative household and terms of trade(tot) in two liberalization scenarios; one, the liberalization of trade, and the other, labor mobility in the enlargement process. The adjusted GTAP-E model, which is a comparative-static general equilibrium model, is used to examine impacts under different liberalization scenarios.

Suggested Citation

  • Aydin, Levent, 2009. "The Impacts of the Trade and Factor Market Liberalization on the Carbon Abatement Policies in the Enlargement of European Union," Conference papers 331842, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331842
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