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Asymmetric industrial energy prices and international trade

Sato, Misato and Dechezlepretre, Antoine (2015) Asymmetric industrial energy prices and international trade. CEP discussion paper, 1337. Centre for Economic Performance, LSE, London, UK.

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Abstract

This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a panel for the period 1996-2011 including 42 countries, 62 sectors and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a †40-65/tCO2 price of carbon in the EU ETS would increase Europe’s imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2015 The Authors
Divisions: Grantham Research Institute
Centre for Economic Performance
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
JEL classification: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
F - International Economics > F1 - Trade > F18 - Trade and Environment
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting; Environmental Equity
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 19 Mar 2015 11:28
Last Modified: 19 Mar 2015 11:28
Projects: CEP Productivity Programme
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/61278

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