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Asymmetric Industrial Energy Prices and International Trade

Author

Listed:
  • Antoine Dechezleprêtre
  • Misato Sato
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%.

Suggested Citation

  • Antoine Dechezleprêtre & Misato Sato, 2015. "Asymmetric Industrial Energy Prices and International Trade," CEP Discussion Papers dp1337, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1337
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    More about this item

    Keywords

    Energy prices; international trade; carbon taxes;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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