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The potential impact of environmental goods trade liberalization on trade and emissions

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  • Bacchetta, Marc
  • Bekkers, Eddy
  • Solleder, Jean-Marc
  • Tresa, Enxhi

Abstract

We combine econometric estimation with quantitative modelling to generate projections on the trade, GDP, and emissions effects of a potential trade liberalization agreement in energy related environmental goods (EREGs) and environmentally preferable products (EPPs). Trade liberalization can contribute to reduced emissions in two ways in our projections: (i) a reduction of import prices of goods promoting energy efficiency; (ii) a reduction in the costs of intermediate and capital goods used in the production of electricity from renewable sources. We evaluate four scenarios combining reductions in tariffs and non-tariff measures (NTMs) of EREGs and EPPs. Using simulations with the WTO Global Trade Model findings show (i) an increase in exports of EREGs and EPPs both at the global level and in most regions; (ii) a modest increase in GDP in all regions because of falling tariffs, NTMs, and increased energy efficiency; (iii) a modest reduction in global emissions of about 0.6%. The dominant channel is energy efficiency whereas the costs of EREGs as intermediates in renewable energy production play a minor role, with or without end use control.

Suggested Citation

  • Bacchetta, Marc & Bekkers, Eddy & Solleder, Jean-Marc & Tresa, Enxhi, 2023. "The potential impact of environmental goods trade liberalization on trade and emissions," WTO Staff Working Papers ERSD-2023-05, World Trade Organization (WTO), Economic Research and Statistics Division.
  • Handle: RePEc:zbw:wtowps:ersd202305
    DOI: 10.30875/25189808-2023-5
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    More about this item

    Keywords

    Environmental Goods (EGs); Trade Liberalization; Emissions; Energy efficiency;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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