Impacts of Trade Friction and Climate Policy on Global Energy Trade Network

Abstract

The trade impacts of the COVID-19 pandemic and the Russian invasion of Ukraine have raised questions about the role of trade and climate policies in energy security and global emissions. This study updates a widely used integrated assessment model (IAM), MESSAGEix-GLOBIOM, to represent complex trade networks to explicitly draw energy flows from their origins to their destination. It then examines the effects of (1) energy trade tariff policies and (2) a global carbon emissions tax on the global energy trade network. Results indicate that trade tariff policies have marginal effects on the network. While high import tariffs significantly reduce emissions due to reduced fossil fuel imports in the importing region, this effect does not translate to significant emission reductions as trade policies only impact downstream of the energy supply chain. However, an emission tax dramatically alters the trade network, by (1) reducing its size by up to 50% and (2) forming trade linkages that allow for a more complex and diverse network of suppliers. This diversity under the emissions tax scenario improves the energy security of major energy-importing regions.

The future evolution of global natural gas trade

“…Recently, a few multi-sectoral modeling studies have included explicit representation of pipeline gas and/or LNG trade pathways. 30 , 31 , 32 IEA’s World Energy Outlook 2022 31 provides global-level pipeline gas and LNG trade projections for scenarios representing different levels of climate policy achievement (comparison plots with our results shown in Figures S9–S13 ), and qualitatively describes regional trends. However, regional-level pipeline gas and LNG trade flows are not quantified.…”

“…Shepard et al. 32 use the MESSAGEix-GLOBIOM integrated assessment model (IAM), with pipeline and LNG trade pathways (see Table S3 for comparison of gas trade across IAMs). They explore the effects of energy trade tariff policies and a global carbon tax on overall global energy trade network characteristics (e.g., size and diversity of supply).…”

Can a CO2 Tax Be Socially Just? Analysis of the Social Distribution Effects of the German CO2 Taxation

“…Before we dive into the discussion on different existing or envisaged measures of taxation and reimbursement, it shall be noted that we implicitly assume carbon taxation to have an effect in terms of decreasing emissions, as several publications conclude [9,[48][49][50]. Following the objections to carbon taxation regarding the question of "fairness" in [51], any further discussion about a socially just distribution of a burden posed on a society would be obsolete if there was no benefit seen outweighing the cost.…”

“…In the meantime, the Russian invasion of Ukraine has led to a significant increase in energy prices separate from any changes in climate policy [8]. However, [9] suggests that the high prices only affect the amount of carbon emissions in energy importing countries but do not translate to a global reduction in carbon emissions as these are merely relocated. A global carbon emission tax would, however, reduce the trade network down to 50% of its size, with an analogous effect on emissions.…”