Scale, Technique and Composition Effects of CO2 Emissions under Trade Liberalization of EGS: A CGE Evaluation for Argentina

Current literature about trade liberalization of
environmental goods and services (EGS) raises doubts about the
extent of the triple win-win situation for trade, development and the
environment. However, much of this literature does not consider the
possibility that this agreement carries technological transmissions,
either through trade or foreign direct investment. This paper presents
a computable general equilibrium model calibrated for Argentina,
where there are alternative technologies (one dirty and one clean
according to carbon emissions) to produce the same goods. In this
context, the trade liberalization of EGS allows to increase GDP,
trade, reduce unemployment and improve the households welfare.
However, the capital mobility appears as the key assumption to
jointly reach the environmental target, when the positive scale effect
generated by the increase in trade is offset by the change in the
composition of production (composition and technical effects by
the use of the clean alternative technology) and of consumption
(composition effect by substitution of relatively lesspolluting
imported goods).

Authors:

• M. Priscila Ramos
• Omar O. Chisari
• Juan Pablo Vila Martínez

Keywords:

• CGE modeling
• CO2 emissions
• composition effect
• scale effect
• technique effect
• trade liberalization of EGS.

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