Week 9 core reading, seminar and activities Flashcards
Who is responsible for CO2 emissions
- Rich countries got rich through industrialising which increased carbon emissions significantly. These countries now focus more on R&D, innovation, and technology and hence emit less carbon emissions than before. These rich countries such as the United States and Germany are now calling for developing countries such as China (The country with the current highest carbon emissions) to reduce their pollution. Many are calling the rich countries hipocrits.
On the one hand, rich countries have a highly skilled workforce, high levels of funding for R&D and technology, so they should be responsible for coming up with a solution for reducing carbon emissions.
However, carbon emissions is a huge issue and it should not be just one or a small group of countries responsibility but it will need the integration of many different countries to work together to solve this issue
Carbon Tax and Carbon Leakage
Carbon tax definition:
A carbon tax is a fee imposed on the carbon content of fossil fuels to reduce greenhouse gas emissions
Objective:
To encourage businesses and individuals to reduce their carbon footprint by making high-carbon activities more expensive
Mechanism:
Governments set a price per ton of CO2 emitted, and businesses must pay based on their emissions
Benefits:
Clear pricing signal, predictable costs for businesses, and revenue generation for governments
Trade, COVID-19 and Climate:
- What are the concerns associated with trade from an environmental perspective?
- Carbon footprint of transporting goods via boat and airplanes which has negative impacts on the environment
- Concerns about carbon and the possibility of a carbon export tax - What factors influence the carbon footprint of a product?
- Food miles (how much a product travels from where it has been grown and produced)
- The efficiency of the supply chain of the product - Is local sourcing always better from an environmental point of view?
- No roses imported from the netherlands to the UK is not necessarily better for the environment than roses imported from Kenya to the UK
- The netherlands uses heated warehouses while Kenyan roses are grown in the sunshine
- Some studies show that the carbon emissions from heated warehouses are bigger than from air travel
How trade cooperation by the United States, the European Union and China can fight climate change
- Together the United States, the European Union (EU), and China account for 60% of the world’s GDP and nearly half of the world’s greenhouse gas emissions
- Climate policy choices have important spillover effects. For example, Chinese subsidisation of solar panes has lowered the global costs of solar energy adoption, spurring energy transitions elsewhere.
- The US hopes to help drive global technological innovation through a portfolio of tax incentives that aim to spur the clear energy transition.
- The EU emphasises carbon pricing via the Emissions Trading System (ETS)
Trade tensions:
- China’s subsidisation dominance raises fears of market power weaponisation through export restrictions
The Role of WTO:
- Studies show that the WTO rules on subsidies, export restrictions and border measures are outdated and insufficient for addressing modern climate-related trade frictions.
Potential Solutions for Cooperation:
- Prioritise reforms in trade rules to address policy differences without harming global competitiveness
- Foster bilateral agreements
- Develop carbon pricing and export restrictions to preven misuse
Climate Change and Auto Supply Chain podcast:
How would you describe the supply chain in the auto industry?
- It has a very complex supply chain as cars are very complicated products
- There are many different parts that are being combined into a single product. They’re combining engines, transmissions, tires, windows and seat belts - most of which are too big and difficult to transport
- Most auto industry firms have a flexible production structure that allows them to move production around in response to business interruptions, due to geopolitical factors, climate change or climate shocks
Climate Change and Auto Supply Chain podcast: How do extreme weather events affect the auto industry?
Flooding can lead to a supply factory having to close down for quite long periods of time which could affect the downward stream supply chain processes
Climate Change and Auto Supply Chain podcast:
Why do the effects of weather events tend to be time persistent?
The local production landscape gets worse after flooding. This leads to the firm not wanting to produce there anymore because the infrastructure might be bad which could make transportation more difficult. Also, input suppliers stop producing there, and therefore, firms start moving away from the region
Climate Change and Auto Supply Chain podcast: How do auto producers tend to react to extreme weather events?
They lend to relocate car production to its plants in other locations that were producing the same models as the plant that was affected.
Climate Change and Auto Supply Chain podcast: How can auto producers build resilience in their supply chains?
- By having flexibility in their supply chain to move production to a different plant that has not been affected by extreme weather events
- By considering the probability that an area will be impacted by weather disasters in the future
- By diversifying their production across space
Peru’s China shock podcast: Part 2
What are the main characteristics of Peru’s trade policy in the 90’s?
- Trade liberalisation and an oppenness to imports and trade
- Openness to foreign direct investment FDI
Peru’s China shock podcast: Part 2
How would you describe the Peruvian apparel industry during the 90’s?
The main apparel market in Peru in the 90s was the Peruvian domestic market which nobody else was catering to. Exports of these items were minimal
Peru’s China shock podcast: Part 2
How did China’s entry into the WTO (2001) affect the Peruvian apparel industry?
Before, most of the clothes sold in Peru were made by Peruvian firms but after China entered into the WTO in 2001, 70% of the clothes sold in Peru were coming from China
Peru’s China shock podcast: Part 2
How did the Peruvian firms adapt? and does the adaptation mechanism validate the theoretical mechanisms?
- Peruvian apparel firms adapted by shifting to selling higher quality products
- Firms changed their composition of workers to higher-skilled workers
- By using Pima cotton
- ## The phenomenon did not validate the theoretical mechanism as there was no government intervention (eg. Change in trade agreements, US tariff cuts) in the process . Peru has existing trade agreement with US and firms found their own way to export and sell their products to the US, where consumers are wealthier and demand for higher quality clothings exists
Peru’s China shock podcast: Part 2
Which theoretical mechanisms can explain the increase in Peru’s apparel exports?
Changes in trade agreements between US and Peru
Peru’s China shock podcast: Part 2
Which firms were able to survive and export?
- Some exit from small firms
- The bigger or more productive firms were able to survive and export (exporting internationally to the US is expensive)
Peru’s China shock podcast: Part 2
What are the main policy implications?
- It is important for governments to think about what firms can do to escape competition and where they can go to differentiate their product and help get some access into the supply chain of these key inputs
- Financial support for investment
- Trade missions helping firms to facilitate the export market.
- Provide advise for firms trying to internationalise
