DP6522 Trade, Technique and Composition Effects: What is Behind the Fall in World-wide SO2 Emissions, 1990-2000?

Author(s):	Jaime de Melo, Jean-Marie Grether, Nicole Andréa Mathys
Publication Date:	October 2007
Keyword(s):	decomposition, embodied emissions in trade, Environment, Growth, Trade, transport
JEL(s):	F11, Q56
Programme Areas:	International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=6522

Combining unique data bases on emissions with sectoral output and employment data, we study the sources of the fall in world-wide SO2 emissions and estimate the impact of trade on emissions. Contrarily to concerns raised by environmentalists, an emission-decomposition exercise shows that scale effects are dominated by technique effects working towards a reduction in emissions. A second exercise comparing the actual trade situation with an autarky benchmark estimates that trade, by allowing clean countries to become net importers of emissions, leads to a 10% increase in world emissions with respect to autarky in 1990, a figure that shrinks to 3.5% in 2000. Additionally, back-of-the-envelope calculations suggest that emissions related to transport are of smaller magnitude, roughly 3% in both periods. In a third exercise, we use linear programming to simulate extreme situations where world emissions are either maximal or minimal. It turns out that effective emissions correspond to a 90% reduction with respect to the worst case, but that another 80% reduction could be reached if emissions were minimal.