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Trade in 'virtual carbon': empirical results and implications for policy

By Giles Atkinson, Kirk Hamilton, Giovanni Ruta and Dominique Van Der Menbrugghe

Abstract

The fact that developing countries do not have carbon emission caps under the Kyoto Protocol has led to the current interest in high income countries in border taxes on the 'virtual' carbon content of imports. We use GTAP data and input-output analysis to estimate the flows of virtual carbon implicit in domestic production technologies and the pattern of international trade. The results present striking evidence on the wide variation in the carbon-intensiveness of trade across countries, with major developing countries being large net exporters of virtual carbon. Our analysis suggests that a tax on virtual carbon could lead to very substantial effective tariff rates on the exports of the most carbon-intensive developing nations. As an illustration, we find that average tariff rates of 10%, 8% and 12% would be faced by imports from China, India and South Africa if carbon is taxed at $50/ton CO2. Moreover, there is wide variation in intensiveness across sectors within countries with implications for the disparate effective tariff burdens on particulars parts of the economies of these countries. Such empirical findings, we argue, are useful for framing on-going discussions about the principles and practice of border taxes on virtual carbon

Topics: GE Environmental Sciences, HC Economic History and Conditions
Publisher: Elsevier
Year: 2010
DOI identifier: 10.1016/j.gloenvcha.2010.11.009
OAI identifier: oai:eprints.lse.ac.uk:36748
Provided by: LSE Research Online
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