On the Interaction between Trade Liberalization of Environmental Goods and Services and the Factor markets when reducing CO2 Emissions: A CGE evaluation for Argentina, Brazil and Chile FIRST DRAFT -DO NOT QUOTE

1 de Octubre de 2016

Autor/es: CHISARI, OMAR OSVALDO / RAMOS, MARÍA PRISCILA /

The 2001 Doha Declaration singled out trade liberalization of Environmental Goods and Services (EGS) as a way to achieve sustainable development by creating a triple-win situation for trade, development, and the environment. We use CGE models to evaluate the consequences of tariffs eliminations on EGS for three upper-middle income Latin American countries (Argentina, Brazil and Chile), under different assumptions of the functioning of the labor market (full employment, constant nominal wages and constant real wages with unemployment) and also on different degrees of capital mobility. Our main results show that there is a trade-off between the labor market workings and the impact on carbon emissions through tariffs elimination on EGS, without a unique pattern of behavior across countries when adding greater capital mobility. Following Brock and Taylor [1], we also decompose the change in carbon emissions in the scale and the composition effects. We find that mitigation of climate change through the tariff cuts on EGS mainly comes from changes in the composition effect rather than the scale effect which continue to increase under trade liberalization. A greater composition effect in most of countries could become compatible a the carbon reduction objective with a lower unemployment, where a greater proportion of mobile capital across sectors could help in this process to a greener economy.

Link: https://www.researchgate.net/publication/309417846_On_the_Interaction_between_Trade_Liberalization_of_Environmental_Goods_and_Services_and_the_Factor_markets_when_reducing_CO2_Emissions_A_CGE_evaluati