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Greening Ricardo: Environmental comparative advantage and the environmental gains from trade

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  • Le Moigne, Mathilde
  • Lepot, Simon
  • Ossa, Ralph
  • Ritel, Marcos
  • Simon, Dóra Zsuzsanna

Abstract

We show that climate policy can unlock large environmental gains from trade by inducing economies to specialize according to their environmental comparative advantage. We make this point by exploring the effects of a carbon tax in a quantitative trade model. Our main result is that the environmental gains from trade account for over one-third of the total reduction in greenhouse gas emissions brought about by the carbon tax. This finding holds for a wide range of carbon tax rates and coverages.

Suggested Citation

  • Le Moigne, Mathilde & Lepot, Simon & Ossa, Ralph & Ritel, Marcos & Simon, Dóra Zsuzsanna, 2024. "Greening Ricardo: Environmental comparative advantage and the environmental gains from trade," WTO Staff Working Papers ERSD-2024-07, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:306822
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    References listed on IDEAS

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    1. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
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    3. Samuel Kortum & David A. Weisbach, 2021. "Optimal Unilateral Carbon Policy," Cowles Foundation Discussion Papers 2311, Cowles Foundation for Research in Economics, Yale University.
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    8. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
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    Cited by:

    1. Javier Flórez Mendoza & Oliver Reiter & Robert Stehrer, 2024. "EU carbon border tax: General equilibrium effects on income and emissions," wiiw Working Papers 254, The Vienna Institute for International Economic Studies, wiiw.

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