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Shifting Trade Patterns as a Means of Reducing Global Carbon Dioxide Emissions
Summary
This article extends and applies the world trade model with
bilateral trade (WTMBT), a linear program with any number of
goods, factors, and regional trade partners that determines regional
production, bilateral trade patterns, and region-specific
prices on the basis of comparative advantage by minimizing
factor use. The model provides a consistent analysis of
the global production system, representing geographical location
at a regional level, region-specific technologies at a sector
level, emissions from production, and resource constraints and
costs. An illustrative analysis investigates how changes in the
geographic distribution of production could contribute to reducing
global carbon dioxide (CO2) emissions and at what
cost. The model provides a bridge between global objectives
and their determinants and consequences in specific sectors in
individual regions. Multi-objective analysis is used to construct
a trade-off curve between global factor costs and CO2 emissions.
The relevance of both primal and dual solution variables
is demonstrated. In particular, changes in goods prices and
emissions are investigated. We conclude that the main impact
of tightening carbon constraints is a substantial reduction in
international trade accompanied by a shift away from regions
most reliant on the combustion of coal. In addition to the
analysis of the overall global trends, including the impact on
prices, the implications of the global carbon constraint for one
specific industry are investigated.
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