Indirect Pollution Haven Hypothesis in a Context of Global Value Chains Arce, G., Cadarso, M. A., López, L. A., Tobarra, M. A., Zafrilla, J. FINAL WIOD CONFERENCE “Causes and Consequences of Globalization” 24, 25 and 26 April 2012
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 OUTLINE Introduction Methodology Results Conclusions/Extensions
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Introduction. Climate Global Change affair Focus on the international trade: - International trade represents the 21% of GPD in 2007. - It represents the 30% of the CO 2 emissions in the world in 2004. 2/3 of the international trade is intermediate goods GLOBAL VALUE CHAINS Is the GVC rise linked to the seek of comparative environmental advantages? Is there a reduction of the global emissions? How can we analyse it? Tools: Balance of Avoided Emissions to analyze the Pollution haven hypothesis (PHH): The lower trade barriers are set (higher trade), the higher emissions are produced?
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Introduction. There are many contributions of the input-output framework to this topics: Munksgaard and Pedersen (2001). • Peters and Hertwich (2006). • Emissions Balances (EB) and Cadarso et al. (2010). • Responsibility Balances (RB) Davis et al. (2011). • Kanemoto (2012). • Dietzenbacher and Mukhopadhyay (2007). Pollution Haven Hypothesis • Chen and Chen (2011). (PHH) – Balances of Avoided • Zhang (2012). Emissions (BAE) • Hummels et al. (2001). Vertical Specialization. • Global Value Chains (GVC) Trefler and Zhu (2010). • Johnson and Noguera (2011). •
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Introduction. Our contribution: We develop a two-region and a MRIO model to analyse how the different stages of production and/or trade are responsible of the existence of PHH In one hand, our methodology allows us to: 1) Decompose the Balance of Avoided Emissions by type of traded good: a) Balance of Avoided Emissions of final goods. b) BAE of intermediate inputs required for the last international stage of production (attending the domestic final demand). c) BAE of intermediate inputs required for all other international stages of production to attend the exported final demand. Points b) and c) captures and measure the existence of Global Value Chains (GVC). c) Captures the Hummels concept of Vertical Specialization.
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 In the other hand, our methodology allows us to: 2) Differentiate between initial, direct and indirect effects: Who takes the delocalisation decision? FIRMS. In global terms, the direct effects of the carbon leakages processes can be high, but it´s interesting to know if the indirect effects are even higher, to implement more accurate regulations. SUMMARIZING: IN THIS PAPER WE ISOLATE THE ROLE OF DIFFERENT COUNTRIES INVOLVED IN GVC, ANALYSING THEIR DIRECT OR TOTAL ENVIRONMENTAL IMPACT. WE APPLY THIS MODEL TO THE TRADE BETWEEN SPAIN AND CHINA (2000-10)
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Methodology (two regions). Trade Balance (TB): Trade Balance by type of good traded: 2.- Intermediate Hummels 3.- Intermediate inputs trade. Vertical 1.- Final goods Last inputs trade. Rest of Specialization trade international international stages. stage. Navigator Barbie dolls Navigator embodied in a trade embodied in a SEAT exported SEAT selled in Spain
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Methodology. Bi-regional Balance of Domestic Emissions (BBDE): • Negative balance (developed countries): they are importing pollution. • Sign depends on: Result of the trade balance and emissions multipliers. • With this methodology, the emissions derived from imports to export are not cancelled, not like in many other balances from literature. BBDE by type of good traded: 3.- Intermediate 2.- Intermediate 1.- Final goods inputs trade. Rest of inputs trade. Last trade international stages. international stage.
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Methodology. Balance of Avoided Emissions (BAE) DTA: Remember the differences: Bi-regional Balance of Avoided Emissions (BBAE): Balance sign depends on: Pollution intensities per country. Trade structure Similar to Comparative Advantage. Limitations: - Right measure of GVC Needed of MRIO models. - International freight transport Cadarso et al. (2010).
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Methodology. BAE by type of good traded: Barbies vs. Serrano Ham Trade 1.- Avoided Emissions of final goods 2.- Avoided Emissions of intermediate inputs, last international stage. 3.i.- BAE of intermediate inputs, imports to export to Region 2. EXPORTS TO: 3.i REGION 2 3.ii ROW 3.ii.- BAE of intermediate inputs, imports to export to ROW
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Results. Empirical analysis for Spain-China case.
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Results (Empirical analysis for Spain-China case). Data sources: Economic structure: Symmetric Input-Output Tables from Spain o and China (OECD, 2005). Trade data by sector: Spain-China trade from Spanish Customs o Department (2005). Spanish emissions data: Atmospheric Emissions Satellite Accounts o (INE, 2005) Chinese emissions data: Two steps: o 1) Calculation of emissions factor by type of energy good combusted (IPCC). 2) Combined with energy consumption data from National Bureau Statistics of China (2005). = Emissions Matrix by Sector.
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Results (Empirical analysis for Spain-China case). Bilateral trade: Spain – China. From 2000 – 2010 (million of Euros): Negative balance of the Spain- 20,000 China Trade Balance. 15,000 - Trade deficit 2000 = 4.159 M€ 10,000 - Trade deficit 2010 = 14.880 M€ 5,000 0 DEFICIT FOR ALL THE SECTORS Exports Imports
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Results (Empirical analysis for Spain-China case). Bi-regional Balance of Domestic Emissions, Spain – China (ktCO 2 ): 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 1 5 6 7 8 9 0 0 -20,000 -40,000 -60,000 -80,000 -100,000 -120,000 -140,000
FINAL WIOD CONFERENCE Indirect Pollution Haven Hypothesis “Causes and Consequences of Globalization” in a Context of Global Value Chains 24, 25 and 26 April 2012 Results (Empirical analysis for Spain-China case). Balance of Avoided Emissions for 2005: 14000 12000 Initial + 10000 Total Direct Indirect 8000 BAE 1 12899,02 4092,02 8807,00 Indirect 6000 BAE 2 9897,97 4287,08 5610,90 4000 Initial + Direct BAE 3.i 581,97 261,82 320,15 2000 BAE 3.ii 6580,03 2954,24 3625,79 0 SUM 29958,99 11595,16 18363,83 Main results: - Emissions Balance (2005) = -61.200 ktCO 2 - BAE (2005) = 29.958 ktCO 2 (49%). The absence of trade, would reduce the global emissions. - The indirect effects are the main important (61%). - The differentiation between type of goods is relevant. TRADE STRUCTURE & POLLUTION INTENSITIES
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