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International trade mechanisms are central to the economic analysis of climate policies. Spillover effects of domestic greenhouse gas emission abatement strategies through international markets have important implications for regional adjustment costs, global environmental effectiveness, and competitiveness impacts at the industrial level. The appropriate design of sub-global climate policies to address concerns on emission leakage and industrial competitiveness will be a major issue in the Post-Kyoto climate policy debate.
The workshop motivates and develops step-by-step state-of-the-art computable general equilibrium (CGE) models of global trade and energy use for climate policy analysis. Numerical implementation of algebraic models is based on GAMS, a convenient and wide-spread programming language for economic analysis.
We start with the formulation of simple stylized closed-economy CGE models as mixed complementarity problems (MCP) and lay out how such models are conveniently matched to empirical data based on the so-called calibrated share form. Next, we explain standard extensions towards open economies based on traditional trade theory and investigate the economic effects of standard trade policy instruments such as tariffs and quotas. Before we switch from stylized to applied policy analysis we introduce MPSGE, a meta-language – building on MCP and the calibrated share – that greatly facilitates the implementation of large-scale CGE models. We then discuss in more detail the implementation of a blueprint multi-sector, multi-region CGE model using empirical data for national accounts and bilateral trade flows from the GTAP database. The standard trade model gets extended with satellite energy flow and CO2 emission data to accommodate impact analysis of standard climate policy measures such as emission taxes and (tradable) quotas. Following a discussion of emission leakage and competitiveness issues in the context of sub-global climate policies, the standard trade model are further refined in order to investigate the implications of border adjustment polices for emission- and trade-intensive industries such as tax rebates or import tariffs. In the final section of the workshop we introduce concepts from new trade theory providing a more sophisticated perspective on international trade mechanisms. We the assess how these alternative modeling paradigms change the implications of border measures on leakage and industry performance thereby potentially leading to different policy conclusions.
Material and teaching is in English. Upon registration, part of the material will be sent out such that participants can prepare in advance.
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