“Multiple Dividends with Climate Change Policies: Evidence …
93
second-best alternatives against the CC problem, being sometimes insufficient to
reduce environmental externalities in small economies (Balineau and de Melo 2011).
Environmentally oriented trade policies could motivate the implementation of
technology innovation in developing countries to address CC policies; however, trade
is not the only means for this purpose since foreign direct investment (FDI) plays a
key role in the environmental and external dividends. Dechezleprêtre et al. (2009)
highlight the role of technology transfers in GHG mitigation in Mexico, Brazil, China
and India. Even though the patterns differ across countries from different continents,
they conclude that the success of technology transfer for CC mitigation in developing
countries is highly dependent on the foreign contribution (FDI such as projects in
subsidiaries, imports), but also on the capacity building in the host countries to
accelerate technology diffusion domestically. Forsyth (2007) also supports the need
for technology transfer for CC mitigation in developing countries (India, the Philippines and Thailand) where establishing partnerships domestically (across sectors and
public–private cooperation) and with foreign partners can reduce economic costs of
delivering cleaner mechanisms for the development dividend.
Similarly to the definition of instruments, these trade-environmental agreements
do not establish specific penalties in case of non-compliance with the commitments
made. However, recent discussions in this regard present some trade policy instruments as a means of sanctioning environmental inaction (e.g. inaction under the
Paris Agreement). The embodied carbon tariff (Böhringer et al. 2016) could be an
example of trade-environmental policy instruments taxing trade based on carbon
content. From the theoretical point of view, it turns out to be equitable to correct the
environmental externality generated by international exchanges, but from the point
of view of its implementation (the absence of complete information by country, by
product and some organizational issues) are, for the moment, impracticable.
Beyond that, the threat or risk of an international sanction through trade policy is
latent and could act as dissuasive measures for the adoption of national environmental
measures.
In this context, which requires the coordination of environmental policies at the
international level and where the urgency of climate phenomena is utmost, the threat
of these possible sanctions could push Latin American countries to carry out ETRs.
Of course, such ETRs must take into account the stylized facts and structural characteristics of developing countries mentioned above. Consequently, an ETR, such
as the tax on GHG emissions, should come to replace distortionary taxes both from
the functional and personal distribution of income, while maintaining/improving the
capacity of the Treasury and private investment financing.
Summing up this review of the literature, there are two important fronts to appraise
the costs of CC policies in developing economies, such as Argentina’s. The first one
is the domestic front, in terms of how wages are determined institutionally or by
the market, because additional costs could be passed through to wages and therefore
reduce employment (with the obvious political consequences). The second one is the
external front: well-intended initiatives of individual countries could be jeopardized
by the stress of the balance of payments, when foreign resources are necessary but
costly; by loss of competitiveness when not accompanied by the rest of the world
93
second-best alternatives against the CC problem, being sometimes insufficient to
reduce environmental externalities in small economies (Balineau and de Melo 2011).
Environmentally oriented trade policies could motivate the implementation of
technology innovation in developing countries to address CC policies; however, trade
is not the only means for this purpose since foreign direct investment (FDI) plays a
key role in the environmental and external dividends. Dechezleprêtre et al. (2009)
highlight the role of technology transfers in GHG mitigation in Mexico, Brazil, China
and India. Even though the patterns differ across countries from different continents,
they conclude that the success of technology transfer for CC mitigation in developing
countries is highly dependent on the foreign contribution (FDI such as projects in
subsidiaries, imports), but also on the capacity building in the host countries to
accelerate technology diffusion domestically. Forsyth (2007) also supports the need
for technology transfer for CC mitigation in developing countries (India, the Philippines and Thailand) where establishing partnerships domestically (across sectors and
public–private cooperation) and with foreign partners can reduce economic costs of
delivering cleaner mechanisms for the development dividend.
Similarly to the definition of instruments, these trade-environmental agreements
do not establish specific penalties in case of non-compliance with the commitments
made. However, recent discussions in this regard present some trade policy instruments as a means of sanctioning environmental inaction (e.g. inaction under the
Paris Agreement). The embodied carbon tariff (Böhringer et al. 2016) could be an
example of trade-environmental policy instruments taxing trade based on carbon
content. From the theoretical point of view, it turns out to be equitable to correct the
environmental externality generated by international exchanges, but from the point
of view of its implementation (the absence of complete information by country, by
product and some organizational issues) are, for the moment, impracticable.
Beyond that, the threat or risk of an international sanction through trade policy is
latent and could act as dissuasive measures for the adoption of national environmental
measures.
In this context, which requires the coordination of environmental policies at the
international level and where the urgency of climate phenomena is utmost, the threat
of these possible sanctions could push Latin American countries to carry out ETRs.
Of course, such ETRs must take into account the stylized facts and structural characteristics of developing countries mentioned above. Consequently, an ETR, such
as the tax on GHG emissions, should come to replace distortionary taxes both from
the functional and personal distribution of income, while maintaining/improving the
capacity of the Treasury and private investment financing.
Summing up this review of the literature, there are two important fronts to appraise
the costs of CC policies in developing economies, such as Argentina’s. The first one
is the domestic front, in terms of how wages are determined institutionally or by
the market, because additional costs could be passed through to wages and therefore
reduce employment (with the obvious political consequences). The second one is the
external front: well-intended initiatives of individual countries could be jeopardized
by the stress of the balance of payments, when foreign resources are necessary but
costly; by loss of competitiveness when not accompanied by the rest of the world