Biofuels and climate change mitigation : a CGE analysis incorporating land-use change

The question of whether biofuels help mitigate climate change has attracted much debate in the literature. Using a global computable general equilibrium model that explicitly represents land-use change impacts due to the expansion of biofuels, this study attempts to shed some light on this question. The study shows that if biofuel mandates and targets currently announced by more than 40 countries around the world are implemented by 2020 using crop feedstocks, and if both forests and pasture lands are used to meet the new land demands for biofuel expansion, this would cause a net increase of greenhouse gas emissions released to the atmosphere until 2043, since the cumulative greenhouse gas emissions released through land-use change would exceed the reduction of emissions due to replacement of gasoline and diesel until then. However, if the use of forest lands is avoided by channeling only pasture lands to meet the demand for new lands, a net increase of cumulative greenhouse gas emissions would occur but would cease by 2021, only a year after the assumed full implementation of the mandates and targets. The study also shows, contrary to common perceptions, that the rate of deforestation does not increase with the rate of biofuel expansion; instead, the marginal rate of deforestation and corresponding land-use emissions decrease even if the production of biofuels increases.Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy and Environment,Environment and Energy Efficiency,Climate Change and Environment

Searching for an alternative to economic partnership agreements:

"On January 1, 2008, Economic Partnerships Agreements (EPAs), currently being negotiated between the European Union (EU) and nearly 80 African, Caribbean, and Pacific (ACP) countries, are expected to replace the Cotonou Agreement, which has governed trade relations between these countries since 2000. The Cotonou Agreement, implemented through a waiver from the World Trade Organization (WTO), expires on December 31, 2007. At the second EU-Africa summit, held in Lisbon on December 8–9, trade issues have been a major bone of contention, with several African heads of state denouncing the way the negotiation had been led by the European Commission. At the end of the summit, the Commission agreed to continue EPA negotiations in 2008." from textInternational agreements, Trade agreements,

Is SAFTA trade creating or trade diverting?: A computable general equilibrium assessment with a focus on Sri Lanka

The Agreement on South Asian Free Trade Area (SAFTA) entered its second phase of implementation in 2008. The creation of a free trade area is expected to affect its participants—Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka—very differently given their diversity in terms of size, income, and structure of trade and protection. Using the 2004 MAcMapHS6-v2 database on measures of applied protection at the HS6 level and MIRAGE, a computable general equilibrium global model, this study examines the effects of SAFTA on trade and net income in the region. The magnitude of the effects will depend on initial levels of protection in the region and whether the agreement is trade diverting or trade creating. An important component of the SAFTA agreement is the exemption of products (sensitive list) from the trade liberalization process. Because such exclusion can restrict significantly the benefits from the regional trade agreement, we simulate the effects of SAFTA with and without sensitive products. Our findings show that among South Asian countries, Sri Lanka gains the most from the agreement because it initially has relatively low tariffs and faces high tariffs in the region. Exempting sensitive products from the agreement limits gains from trade for the lower-middle-income members of SAFTA but may be welfare enhancing for the least developed economies.South Asian Free Trade Area (SAFTA), trade liberalization, Computable General Equilibrium (CGE) model, welfare, trade, applied protection, income, FTA, Markets, Globalization,

Two opportunities to deliver on the Doha Development pledge:

"In this brief, we evaluate the effects of a possible Doha agreement based on proposals currently on the table from the United States, the European Union, and the Group of Twenty (G20)....[The brief presents] two development-oriented alternatives...which demonstrate that more can be accomplished in the Doha Round if these two development-oriented and pro-trade measures are used." from TextAgricultural subsidies, tariffs, Doha Developmental Round of the World Trade Organization (WTO), Trade reform, Protectionism, trade policies, Trade barriers, exports, International trade, Market access, MIRAGE model,

Genetically modified food and international trade: The case of India, Bangladesh, Indonesia, and the Philippines

"Genetically modified (GM) food crops have the potential to raise agricultural productivity in Asian countries, but they are also associated with the risk of market access losses in sensitive importing countries. We study the potential effects of introducing GM food crops in Bangladesh, India, Indonesia, and the Philippines in the presence of trade-related regulations of GM food in major importers. We focus on GM field crops (rice, wheat, maize, soybeans, and cotton) resistant to biotic and abiotic stresses, such as drought-resistant rice, and use a multi-country, multi-sector computable general equilibrium model. We build on previous international simulation models by improving the representation of the productivity shocks associated with GM crops, and by using an improved representation of the world market, accounting for the effects of GM food labeling policies in major importers and the possibility of segregation for non-GM products going toward sensitive importing countries. The results of our simulations first show that the gains associated with the adoption of GM food crops largely exceed any type of potential trade losses these countries may incur. Adopting GM crops also allows net importing countries to greatly reduce their imports. Overall, we find that GM rice is bound to be the most advantageous crop for the four countries. Second, we find that segregation of non-GM crops can help reduce any potential trade loss for GM adopters, such as India, that want to keep export opportunities in sensitive countries, even with a 5 percent segregation cost. Lastly, we find that the opportunity cost of segregation is much larger for sensitive importing countries than for countries adopting new GM crops, which suggests that sensitive importers will have the incentive to invest in separate non-GM marketing channels if exporting countries like India decide to adopt GM food crops." from Authors' AbstractGenetically modified food, International trade, Developing countries, Segregation,

Genetically Modified Rice, International Trade, and First-Mover Advantage: The Case of India and China

Crop Production/Industries, International Relations/Trade,

Under what conditions does a carbon tax on fossil fuels stimulate biofuels ?

A carbon tax is an efficient economic instrument to reduce emissions of carbon dioxide released from fossil fuel burning. Its impacts on production of renewable energy depend on how it is designed -- particularly in the context of the penetration of biofuels into the energy supply mix for road transportation. Using a multi-sector, multi-country computable general equilibrium model, this study shows first that a carbon tax with the entire tax revenue recycled to households through a lump-sum transfer does not stimulate biofuel production significantly, even at relatively high tax rates. This reflects the high cost of carbon dioxide abatement through biofuels substitution, relative to other energy substitution alternatives; in addition, the carbon tax will have negative economy-wide consequences that reduce total demand for all fuels. A combined carbon tax and biofuel subsidy policy, where part of the carbon tax revenue is used to finance a biofuel subsidy, would significantly stimulate market penetration of biofuels. Although the carbon tax and biofuel subsidy policy would cause higher loss in global economic output compared with the carbon tax with lump sum revenue redistribution, the incremental output loss is relatively small.Climate Change Mitigation and Green House Gases,Transport Economics Policy&Planning,Taxation&Subsidies,Environment and Energy Efficiency,Energy and Environment

IMPACTS OF LARGE SCALE EXPANSION OF BIOFUELS ON GLOBAL POVERTY AND INCOME DISTRIBUTION

This paper analyzes the impact of expansion in biofuels on the global economy, income distribution and poverty. It utilizes simulation results of two World Bank models: a global computable general equilibrium (CGE) model integrated with biofuels, land-use, and climate change modules, and a global income distribution model that utilizes household survey data of 116 countries. The first model simulates the effects over time of large scale expansion of biofuels on resource allocation, output prices, commodity prices, factor prices, and household income of the different countries and regions in the world. The second model uses these results recursively to calculate the impact on global income distribution and poverty. The results from the CGE model indicate that large scale expansion of biofuels lead to higher world prices of sugar, corn, oilseeds, wheat, and other grains, which lead to higher food prices. The increase in food inflation is higher in developing countries than in developed countries. The expansion of biofuels results in higher wages of unskilled rural labor relative to wages of the other labor types which are skilled urban, skilled rural, and unskilled urban, especially in developing countries. These positive wage effects on unskilled rural labor trigger movement of unskilled urban labor towards rural and agriculture. This is because production of feedstock in developing countries is relatively intensive in the use of unskilled rural labor. The effects of large scale expansion of biofuels on poverty vary across regions. But overall there is a slight increase in global poverty. The increase largely comes from South Asia (particularly India) and Sub-Saharan Africa. Significant number of countries in Sub-Saharan Africa show higher poverty with large scale expansion of biofuels. However, poverty declines in East Asia and Latin America regions. Overall, there is a slight increase in the GINI coefficient. There is a slight increase in the GINI coefficient in Sub-Saharan Africa and East Asia. There is a small reduction in the GINI coefficient in the rest of the regions.Agricultural and Food Policy, Environmental Economics and Policy, Food Security and Poverty, International Relations/Trade, Land Economics/Use, Resource /Energy Economics and Policy,

More or less ambition?: modeling the development impact of U.S.–EU agricultural proposals in the Doha Round

"What is at stake in the standoff between the United States and Europe over agriculture in the Doha Round of trade talks at the World Trade Organization (WTO)? What impact would an agreement based on greater or lesser levels of ambition have on developing countries, whose economies depend heavily on agriculture? Two years after the WTO talks broke down in Cancún, reform of the heavily protected and subsidized agricultural sectors of the United States and Europe remains a major impediment to progress. Using the MIRAGE computable general equilibrium model of the global economy, in this policy brief we compare different scenarios for the Doha agriculture negotiations, taking real numbers from the proposals currently on the table from the European Union (EU), the United States, and the G20 group of developing countries." from TextAgricultural subsidies, tariffs, Doha Developmental Round of the World Trade Organization (WTO), Trade reform, Protectionism, trade policies, Trade barriers, exports, International trade, General equilibrium model, Market access,

The effects of alternative free trade agreements on Peru: Evidence from a global computable general equilibrium model

"By using a global computable general equilibrium model, this report analyzes the impact of various pending free trade agreements for Peru. In December 2007, a Peru–United States free trade agreement (FTA) was finally ratified by the U.S. Congress, replacing the Andean Trade Promotion and Drug Eradication Act, which awarded Peru and other Andean countries nonreciprocal preferential tariffs. A Peru–European Union (EU27) FTA is also being negotiated in the context of Peru's participation in the integration of the Andean Community (CAN). Finally, as of October 2008 Peru is concluding negotiations for a free trade agreement with China, its third major trading partner after the United States and the EU27. Although these agreements are expected to improve market access, their impact on the economic welfare of the beneficiary countries is dependent on the countries' structure of current tariffs and trade and the extent to which the new agreements result in trade diversion versus trade creation. The analysis shows that specific features of Peru's trade and tariff structures make the country a better candidate for a South-South FTA with China than for North-South FTAs with the United States or the EU27." from authors' abstractWTO, Free Trade Agreement, trade liberalization, CGE Modeling,