Trade barriers (2024)

International trade policies that are not directly related to greenhouse gas emissions could also affect emissions levels. Natural and man-made trade barriers, including tariffs and the fuel efficiency of transportation, could impact the production and movement of goods along global value chains. Thus, changes in trade policies will alter the CO₂ emissions associated with these processes.

Richard Klotz and Rishi Sharma of Colgate University, USA, explored how non-carbon policies will promote or obstruct mitigation efforts. With a multi-country, multi-sector quantitative general equilibrium framework, the researchers identify the key role of transportation and the use of intermediate inputs in the climate consequences of policy changes. Reduced trade barriers will increase gross flows, indicating a lengthening of value chains and more emissions from the transportation sector. The researchers further find that reduced barriers will cause higher relative wages compared with the price of other goods, implying higher labour costs and potentially more emissions from intermediate goods. They also incorporated several partial liberalization scenarios and find that reducing tariff escalation will increase global welfare with limited CO₂ emissions. Lastly, they emphasize that tariffs are not a reasonable mitigation instrument given their high cost.

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