Date of Award

Fall 2013

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Agricultural Economics

First Advisor

Thomas W. Hertel

Second Advisor

Juan P. Sesmero

Committee Chair

Thomas W. Hertel

Committee Member 1

Juan P. Sesmero

Committee Member 2

Timothy N. Cason

Committee Member 3

Alla Golub

Abstract

The role of trade sanctions in enforcing greenhouse gas mitigation agreements is the fundamental theme of the three essays comprising this dissertation. All three essays employ a multi-sector, multi-region computable general equilibrium model, GTAP-AEZ-GHG, documented in Golub et al. (2009) to investigate how the United States can use trade sanctions as an enforcement mechanism in a global greenhouse gas (GHG) mitigation agreement. The focus is placed on inducing China to comply with the global agreement.

The first essay contributes to the body of knowledge on global GHG emissions mitigation agreements by investigating the range of emission taxes that can be enforced successfully through punitive tariffs (used by the U.S. against China). The results suggest that the ability of punitive tariffs to enforce a multilateral environmental agreement may be substantial. However, the set of credible and effective threats shrinks as the emission tax increases from 0 to $38/TCE, and becomes null afterwards. Therefore, there is a trade-off between the targeted abatement level and the viability of punitive tariffs as an enforcement mechanism. The results are robust to meaningful changes in Armington elasticities.

The second essay investigates the economic and environmental performance of emission-based Border Tax Adjustments (BTAs) in agricultural sectors. The analysis shows that emission-based BTAs are helpful in controlling emissions leakage but not on the loss of competitiveness in agricultural sectors. It is also observed that the results about the assessment of impacts of BTAs on emissions leakage are quite sensitive to the method used to measure the emission content of products. Ignoring indirect emissions in a production chain leads to underestimation of emission content of products which as a result leads to underestimation of effectiveness of BTAs.

The final essay brings the understanding having been developed in Essays 1 and 2 together and investigates the viability of emission-based BTAs as an enforcement mechanism used by the U.S. against China in global GHG mitigation agreements. It is found that as long as global emission tax does not exceed $21.50/TCE threshold, and there is no legal constraints imposed by the World Trade Organization (WTO) it is possible for the U.S. to find a viable BTA level to induce China to take the same abatement measures. However, when GATT is followed and damage of pollution is not taken into account, the set of viable BTA threats is empty. Comparison of this result with the findings of the first essay of this dissertation suggests that, by providing a wider range of viable emission tax, punitive tariffs provide more stability to a global GHG mitigation agreement than emission-based BTAs. It is also observed that the maximum enforceable emissions tax (MET) increases as the marginal damage from pollution increases. For instance, increase in marginal cost of pollution from $0 to $5/TCE increases MET by $8 (from $21.50/TCE to $30/TCE).

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