Towards net-zero emissions: impacts on trade and income across and within countries

The impact of a changing climate and the transition to a low carbon world will lead to differing economic outcomes between and within countries. This paper applies global economic models and disaggregated sector and country level modelling to assess the impacts on different countries and groups within countries of shifts in comparative advantage due to climate change and of policies introduced to mitigate emissions. The latter will lead to significant changes in the energy structures that could lead to dramatic changes in countries’ economies and global trade—depending on the nature of the transformation and the policies implemented to achieve GHGs emission reductions. For example, a sharp move to solar and wind, or other renewables, on the other hand, will drastically reduce the demand for fossil fuels and create a new set of winners and losers in the production and export of energy and energy related goods and services. Taxes on greenhouse gas emissions (or other policies to limit emissions) will change the relative cost of production and prices of goods and change comparative advantage for sectors across the board and induce changes in trade patterns. The research will conclude with policy recommendations aimed at facilitating the low carbon transition while minimizing the adjustment costs for workers.