Séminaire

Energy Costs and International Trade: Incorporating Input-Output Linkages

Ron Chan (University of Manchester)

14 novembre 2016, 11h00–12h15

Toulouse

Salle MS 003

Environment Economics Seminar

Résumé

A number of developing and emerging economies subsidize households’ energy bills by heavily taxing energy prices for their industries, raising concerns of their international competitiveness. Our study revisits the question of how much energy costs affect a country’s exports. Unlike the approach used in previous literature, we use an inter- country input-output model to compute embodied energy costs for each sector, before we regress exports on such costs. We find that a 10% increase in electricity price could lead to a 0.6% to 1.3% decrease in exports, while a change in natural gas prices lead to a more modest impact on trade. We show that a simulated a 15% increase in energy price in India, potentially as a result of the energy cross-subsidization, could lead to a 3% decrease in exports or a 4.8% decrease in net exports. We find that we might underestimate the predicted impact on exports for a number of sectors should we not consider their input-output relationships.