Distance isn’t dead : An empirical evaluation of food miles-based preference changes

Food miles measure the distance food travels to reach consumers plates. Although substituting local food for imported produce will not necessarily reduce greenhouse gas (GHG) emissions, the food miles movement is an intuitively appealing idea to consumers and supported by import-competing producers. We investigate the economic implications of food miles-induced preference changes in Europe using a global, economy-wide model. We observe large welfare losses for New Zealand and several Sub-Saharan African nations. This suggests that food miles campaigns will increase global inequality without necessarily improving environmental outcomes. We then consider the implications of our results for New Zealand businesses and government agencies. We conclude that there is an ongoing requirement for careful monitoring of offshore consumer trends and that New Zealand firms need to demonstrate their sustainability credentials to avoid suffering negative demand shocks.food miles, non-tariff barriers, trade protection

Will Border Carbon Adjustments Work?

Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/).The potential for greenhouse gas (GHG) restrictions in some nations to drive emission increases in other nations, or leakage, is a contentious issue in climate change negotiations. We evaluate the potential for border carbon adjustments (BCAs) to address leakage concerns using an economy-wide model. For 2025, we find that BCAs reduce leakage by up to two-thirds, but result in only modest reductions in global emissions and significantly reduce welfare. In contrast, BCA-equivalent leakage reductions can be achieved by very small emission charges or efficiency improvements in nations targeted by BCAs, which have negligible welfare effects. We conclude that BCAs are a costly method to reduce leakage but such policies may be effective coercion strategies. We also investigate the impact of BCAs on sectoral output and evaluate the leakage contributions of trade and changes in the price of crude oil.This study received support from the MIT Joint Program on the Science and Policy of Global Change, which is funded by a consortium of government, industry and foundation sponsors

Limited Sectoral Trading between the EU ETS and China

In the negotiations of the United Nations Framework Convention on Climate Change (UNFCCC), new market mechanisms are proposed to involve Non-Annex I countries in the carbon markets developed by Annex I countries, beyond their current involvement through the Clean Development Mechanism (CDM). Sectoral trading is one such mechanism. It would consist of coupling one economic sector of a Non-Annex I country, e.g., the Chinese electricity sector, with the carbon market of some Annex I countries, e.g., the European Union Emission Trading Scheme (EU ETS). Previous research analyzed the potential impacts of such a mechanism and concluded that a limit would likely be set on the amount of carbon permits that could be imported from the non-Annex I country to the Annex I carbon market, should such a mechanism come into effect. This paper analyzes the impact of limited trading in carbon permits between the EU ETS and Chinese electricity sector when the latter is constrained by a 10% emissions reduction target below business as usual by 2030. The limit on the amount of Chinese carbon permits that could be sold into the European carbon market is modeled through the introduction of a trade certificate system. The analysis employs the MIT Emissions Prediction and Policy Analysis (EPPA) model and takes into account the banking–borrowing of allowances and the inclusion of aviation emissions in the EU ETS. We find that if the amount of permits that can be imported from China to Europe is 10% of the total amount of European allowances, the European carbon price decreases by 34%, while it decreases by 74 % when sectoral trading is not limited. As a consequence, limited sectoral trading does not reverse the changes initiated in the European electricity sector as much as unlimited sectoral trading would. We also observe that international leakage and leakage to non-electricity sectors in China are lower under limited sectoral trading, thus achieving more emissions reductions at the aggregate level. Finally, we find that, if China can capture the rents due to the limit on sectoral trading, it is possible to find a limit that makes both regions better off relative to when there is no international trade in carbon permits.The authors wish to thank Henry D. Jacoby for helpful comments and suggestions. The Joint Program on the Science and Policy of Global Change is funded by the U.S. Department of Energy, Office of Science under grants DE-FG02-94ER61937, DE-FG02-93ER61677, DEFG02-08ER64597, and DE-FG02-06ER64320; the U.S. Environmental Protection Agency under grants XA-83344601-0, XA-83240101, XA-83042801-0, PI-83412601-0, RD-83096001, and RD-83427901-0; the U.S. National Science Foundation under grants SES-0825915, EFRI

Trade, technology and relative wages: a computable general equilibrium analysis

The cause(s) of increased wage inequality in developed nations in recent decades is a contentious issue in international economics. In the UK, the ratio of non-manual to manual wages increased by 24.4 percent between 1979 and 1999. Over the same interval, there has been an increase in the relative supply of skilled workers. This suggests that the increase in the relative wage of skilled labour has been driven by a large increase in relative demand for this type of labour. Two candidates commonly cited as the catalyst behind the demand shift are increased trade between developed countries and unskilled-labour-abundant developing nations, and technical change favouring skilled labour. This thesis contributes to the debate by evaluating the effects of trade and technology on UK wages using a computable general equilibrium framework. Modelling is aided by identifying a larger number of labour types than is the norm and estimating changes in the stocks of four different capital assets over the period of interest. The results, although sensitive to key parameter values, single out technical change as the cause of increased wage dispersion in the UK, but also raise the possibility that trade has had a significant adverse effect on the relative wage of a narrowly defined group of workers at the bottom end of the skill distribution

The Energy and Economic Impacts of Expanding International Emissions Trading

Emissions trading systems are recognized as a cost-effective way to facilitate emissions abatement and are expected to play an important role in international cooperation for global climate mitigation. Starting from the planned linkage of the European Union’s Emissions Trading System with a new system in Australia in 2015, this paper simulates the impacts of expanding this international emissions market to include China and the US, which are respectively the largest and second largest carbon dioxide (CO2) emitters in the world. We find that including China and the US significantly impacts the price and the quantity of permits traded internationally. China exports emissions rights while other regions import permits. When China joins the EU-Australia/New Zealand (EU-ANZ) linked market, we find that the prevailing global carbon market price falls significantly, from $33 per ton of carbon dioxide (tCO2) to$11.2/tCO2. By contrast, adding the US to the EU-ANZ market increases the price to $46.1/tCO2. If both China and the US join the linked market, the market price of an emissions permit is$17.5/tCO2 and 608 million metric tons (mmt) are traded, compared to 93 mmt in the EU-ANZ scenario. The US and Australia would transfer, respectively, 55% and 78% of their domestic reduction burden to China (and a small amount to the EU) in return for a total transfer payment of $10.6 billion. International trading of emissions permits also leads to a redistribution of renewable energy production. When permit trading between all regions is considered, relative to when all carbon markets operate in isolation, renewable energy in China expands by more than 20% and shrinks by 48% and 90% in, respectively, the US and Australia-New Zealand. In all scenarios, global emissions are reduced by around 5% relative to a case without climate policies.The authors are grateful for the support provided by the National Key Technology R&D Program from Ministry of Science and Technology of Grant NO. 2012BAC20B07. We acknowledge the support of the National Key Technology R&D Program and the Institute for Energy, Environment, and Economy at Tsinghua University, which is supporting Tianyu Qi’s doctoral research as a visiting scholar at the Massachusetts Institute of Technology. We acknowledge the support of ENI, ICF and Shell, initial Founding sponsors of the China Energy and Climate Project. This consortium of sponsors has provided support for researchers in the MIT Joint Program to engage in a five-year program of research focused on China. None of the sponsoring organizations played a role in the study design, collection, analysis, or interpretation of the data used for this study, nor did they influence our decisions to submit the article for publication, and all errors are our own

Will Economic Restructuring in China Reduce Trade-Embodied CO2 Emissions?

We calculate CO2 emissions embodied in China’s net exports using a multi-regional input-output database. We find that the majority of China’s export-embodied CO2 is associated with production of machinery and equipment rather than energy-intensive products, such as steel and aluminum. In 2007, the largest net recipients of embodied CO2 emissions from China include the EU (360 million metric tons, mmt), the U.S. (337 mmt), and Japan (109 mmt). Overall, annual CO2 emissions embodied in China’s net exports totaled 1,177 mmt, equal to 22% of China’s total CO2 emissions. We also develop a global general equilibrium model with a detailed treatment of energy and CO2 emissions. We use the model to analyze the impact of a sectoral shift in the Chinese economy away from industry and towards services, both without and with a decrease in China’s trade surplus, and a tax on energy-intensive exports, which reflect policy objectives in China’s Twelfth Five-Year Plan (2011–2015). We find that without a decrease in the trade surplus, both policies will have a limited impact on China’s net exports of embodied CO2 emissions. The policies have an even smaller effect on global emissions, as reduced production in China is partially offset by increased production elsewhere.We acknowledge the support of the National Social Science Foundation of China (Project No. Project No. 09&ZD029) and the Institute for Energy, Environment, and Economy at Tsinghua University, which is supporting Tianyu Qi’s doctoral research as a visiting scholar at the Massachusetts Institute of Technology. We further acknowledge the support of Eni S.p.A., ICF International, and Shell International Ltd., initial sponsors of the China Energy and Climate Project in the MIT Joint Program on the Science and Policy of Global Change at MIT. None of the sponsoring organizations played a role in the study design, collection, analysis, or interpretation of the data used for this study, nor did they influence our decisions to submit the article for publication, and all errors are our own. We also acknowledge general industrial and government sponsors of the Joint Program on the Science and Policy of Global Change (http://globalchange.mit.edu/sponsors/all)

What to Expect from Sectoral Trading: A U.S.–China Example

Abstract and PDF report are also available on the MIT Joint Program on the Science and Policy of Global Change website (http://globalchange.mit.edu/)In recent United Nations Framework Convention on Climate Change (UNFCCC) negotiations, sectoral mechanisms were proposed as a way to encourage early action and spur investment in low carbon technologies in developing countries, particularly in the electricity sector. Sectoral trading, which is one such proposition, involves including a sector from one or more nations in an international cap-and-trade system. In order to assess potential impacts from such a mechanism, we analyze trade in carbon permits between the Chinese electricity sector and a U.S. economy-wide cap-and-trade program using the MIT Emissions Prediction and Policy Analysis (EPPA) model. We find that this sectoral policy induces significant financial transfers between the two countries. In 2030, the U.S. purchases permits valued at $42 billion from China, which represents more than 46% of its capped emissions. Despite these transfers, there is only a small change in Chinese welfare. In the U.S., the availability of relatively cheap emissions permits significantly reduces the cost of climate policy. In China, sectoral trading increases the price of electricity and reduces the amount of electricity generated, particularly from coal, while opposite effects are observed in the U.S. Despite increases in the price of electricity in China, only small increases in electricity generation from nuclear and renewables are projected in the timeframe of our analysis (2010- 2030). Because the price of coal decree ses, we also find that sectoral trading leads to emissions increases in non-electricity sectors in China, a form of internal carbon leakage.This study received support from the MIT Joint Program on the Science and Policy of Global Change, which is funded by a consortium of government, industry and foundation sponsors

Economic and emissions impacts of renewable fuel goals for aviation in the US

The US Federal Aviation Administration (FAA) has a goal that one billion gallons of renewable jet fuel is consumed by the US aviation industry each year from 2018. We examine the economic and emissions impacts of this goal using renewable fuel produced from a Hydroprocessed Esters and Fatty Acids (HEFA) process from renewable oils. Our approach employs an economy-wide model of economic activity and energy systems and a detailed partial equilibrium model of the aviation industry. If soybean oil is used as a feedstock, we find that meeting the aviation biofuel goal in 2020 will require an implicit subsidy from airlines to biofuel producers of $2.69 per gallon of renewable jet fuel. If the aviation goal can be met by fuel from oilseed rotation crops grown on otherwise fallow land, the implicit subsidy is$0.35 per gallon of renewable jet fuel. As commercial aviation biofuel consumption represents less than 2% of total fuel used by this industry, the goal has a small impact on the average price of jet fuel and carbon dioxide emissions. We also find that, under the pathways we examine, the cost per tonne of CO[subscript 2] abated due to aviation biofuels is between $50 and$400.United States. Federal Aviation Administration. Office of Environment and Energy (FAA Award 06-C-NE-MIT, Amendments 018 and 028)United States. Federal Aviation Administration. Office of Environment and Energy (FAA Award 09-C-NE-MIT, Amendments 007, 020, and 025)United States. Federal Aviation Administration. Office of Environment and Energy (FAA Award DTFAWA-05-D-00012, Task Order 0009

New Data and Analysis on Non-tariff Measures in Agri-food Trade

We outline new data on non-tariff measures (NTMs) in agricultural trade collected as part of the NTM-Impact project. The data cover product and process standards, conformity assessment measures, and country requirements for the EU and 10 other countries. We create a Heterogeneity Index of Trade (HIT) regulations to aggregate data on different measures, and estimate the impact of regulatory heterogeneity on trade using a gravity framework. Our results suggest that differences in standards reduce trade in beef and pig meat, but have little impact on trade in other agri-food products.Non-tariff measures (NTMs), import requirements, agri-food trade, gravity estimation, Agricultural and Food Policy, International Relations/Trade,

Are Land-use Emissions Scalable with Increasing Corn Ethanol Mandates in the United States?

In response to the Renewable Fuel Standard, the U.S. transportation sector now consumes a substantial amount (13.3 billion gallons in 2010) of ethanol. A key motivation for these mandates is to expand the consumption of biofuels in road transportation to both reduce foreign oil dependency and to reduce greenhouse gas (GHG) emissions from the consumption of fossil fuels in transportation. In this paper, we present the impacts of several biofuels expansion scenarios for the U.S. in which scaled increases in the U.S. corn ethanol mandates are modeled to explore the scalability of GHG impacts. The impacts show both expected and surprising results. As expected, the area of land used to grow biofuel crops increases with the size of the policy in the U.S., and some land-use changes occur abroad due to trade in agricultural commodities. Because the land-use changes happen largely in the U.S., there is an increase in U.S. land-use emissions when natural lands are converted to agricultural use in the policy scenarios. Further, the emissions impacts in the U.S. and the rest of the world in these scenarios, including land-use emissions, scale in direct proportion to the size of the U.S. corn ethanol mandates. On the other hand, the land-use emissions that occur in the rest of the world are disproportionately larger per hectare of change due to conversions of more carbon-rich forests to cultivate crops and feed livestock.We gratefully acknowledge the financial support for this work from the U.S. Department of Energy, Office of Science under DE-FG02-94ER61937, the U.S. Environmental Protection Agency under XA-83600001-1 and XA-835055101-2, and other government, industry, and foundation sponsors of the Joint Program on the Science and Policy of Global Change