Regional trade agreement burdens global carbon emissions mitigation

Abstract

Regional trade agreements (RTAs) have been widely adopted to facilitate international trade and cross-border investment and promote economic development. However, ex ante measurements of the environmental effects of RTAs to date have not been well conducted. Here, we estimate the CO₂ emissions burdens of the Regional Comprehensive Economic Partnership (RCEP) after evaluating its economic effects. We find that trade among RCEP member countries will increase significantly and economic output will expand with the reduction of regional tariffs. However, the results show that complete tariff elimination among RCEP members would increase the yearly global CO₂ emissions from fuel combustion by about 3.1%, doubling the annual average growth rate of global CO₂ emissions in the last decade. The emissions in some developing members will surge. In the longer run, the burdens can be lessened to some extent by the technological spillover effects of deeper trade liberalization. We stress that technological advancement and more effective climate policies are urgently required to avoid undermining international efforts to reduce global emissions.

The Regional Comprehensive Economic Partnership (RCEP) will come into force in January 2022. Here the authors quantify ex ante economic and environmental effects following RCEP tariff reductions.