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The Economic Effects of Border Measures in Subglobal Climate Agreements

The Kyoto agreement as originally drafted sought to mitigate anthropogenic greenhouse gas emissions through policy measures by most industrialized countries. It now seems likely that the agreement will be ratified and implemented without the participation of the United States. Any emissions abatement policies which have a measurable reduction in global emissions will induce changes in the terms of trade and comparative advantage and competitiveness To the extent that aggressive policies are undertaken to reduce CO2 emissions, there are likely to be strong calls in the Kyoto coalition for greenhouse-gas related border adjustment measures. This paper uses a multi-region, multi-commodity static general equilibrium model to quantify and assess the implications of such policies.

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation; Energy and the Economy – Energy as a Productive Input; Energy and the Economy –Economic Growth and Energy Demand; Energy and the Economy – Resource Endowments and Economic Performance; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes:
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
O13 - Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q34 - Natural Resources and Domestic and International Conflicts
F44 - International Business Cycles

Keywords: Climate agreements, Kyoto, CO2 emissions policy, greenhouse gases, CGE model, FCCC

DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No4-6

Published in Volume 26, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.