Asymmetric industrial energy prices and international trade

Sato, Misato ORCID: 0000-0002-9978-9595 and Dechezlepretre, Antoine (2015) Asymmetric industrial energy prices and international trade. CEP discussion paper (1337). London School of Economics and Political Science. Centre for Economic Performance, 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
Date Deposited:	19 Mar 2015 11:28
Last Modified:	30 Oct 2025 04:00
Projects:	CEP Productivity Programme
Funders:	Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/61278

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