How does trade affect greenhouse gas emissions? Trade economists have developed a conceptual framework for examining how trade opening can affect the environment. This framework, first applied to study the environmental impact of the North American Free Trade Agreement (NONFAT), separates the impact of trade liberalizing Into three independent effects: scale, composition and technique. This framework can be used therefore to study the link between trade opening and climate change.
The “scale” detect refers to the Impact n greenhouse gas emissions from the increased output or economic activity resulting from freer trade. The general presumption is that trade opening will increase economic activity and hence energy use. Everything else being equal, this increase in the scale of economic activity and energy use will lead to higher levels of greenhouse gas emissions. The “composition” effect refers to the way that trade liberalizing changes the mix of a country’s production towards those products where It has a comparative advantage.
This reallocation of resources within a country is how trade Improves economic efficiency. The detect on greenhouse gas emissions will depend on the sectors in which a country has comparative advantage. The composition effect will result In less greenhouse gas emissions if the expanding sectors are less energy intensive than the contracting sectors Whether the composition effect results in higher or lower greenhouse gas emissions is therefore difficult to predict In advance.
Finally, trade opening can lead to improvements in energy efficiency -? the ;technique” effect -? so that the production of goods and services generates less greenhouse gas emissions. This decline In emission Intensity can come about in two ways. First, freer trade will increase the availability and lower the cost of environmentally-friendly goods, services and technologies. This is particularly important for countries that do not have access to these goods, services and technologies or whose domestic industries do not produce them in sufficient scale or at affordable prices.
For exporters, additional market access can provide Incentives to develop new products, services and technologies to mitigate climate change. Second, the Increase In Income that trade brings about can lead society to demand better environmental quality -? in other words, less greenhouse gas emissions. Since the scale and technique effects tend to work in opposite directions, and the composition effect depends on the comparative advantage of countries, the overall impact of trade on greenhouse gas emissions cannot be determined in advance.
It will depend on the magnitude or strength of each of the three effects. The technique effect reflects the principal avenue through which trade opening can help mitigate climate change, hence the Importance of the current Dada Round and In particular the negotiation to liberalize environmental goods and services. By increasing the availability of goods, services and technologies that are likely to be important in Improving energy efficiency, trade can help to meet the challenge of global warming.
Contemporary business development By walleyes operates the impact of trade liberalizing into three independent effects: scale, between trade opening and climate change. The “scale” effect refers to the impact where it has a comparative advantage. This re-allocation of resources within a country is how trade improves economic efficiency. The effect on greenhouse gas The composition effect will result in less greenhouse gas emissions if the expanding sectors are less energy intensive than the contracting sectors. Whether the difficult to predict in advance.
Finally, trade opening can lead to improvements in energy efficiency -? the “technique” effect -? so that the production of goods and services generates less greenhouse gas emissions. This decline in emission intensity incentives to develop new products, services and technologies to mitigate climate change. Second, the increase in income that trade brings about can lead society to mitigate climate change, hence the importance of the current Dada Round and in particular the negotiations to liberalize environmental goods and services. By important in improving energy efficiency, trade can help to meet the challenge of
