University
of
Washington
Geography
349
Trade, Resources, and
the Natural Environment
How and why might
increased international trade affect the
natural environment?
1) Positive
impacts may come from the
ways that the environment affects costs that
are internalized
by firms:
a) International
procurement
of resources where they are most available.
b) Production/refining
so
as to minimize overall transportation costs.
2) Negative
impacts result from economic externalities
– actors don’t bear the costs of their actions
– and non-economic
considerations
a) Externalities:
i) Under
current
factor pricing, the price of fossil fuels
doesn’t reflect the
externalities
from their consumption. To
the extent
that trade increases output, and that output
requires fossil fuels,
this is an
indirect cost of trade.
ii) Air
pollution and
CO2 emissions from international
transportation: shippers
pay
for the fuel, but don’t pay for pollution and
other emissions (unless
that were
somehow accounted for and added via a tax to
the cost of fuel).
iii) Differential
environmental
standards across countries mean that some
countries can
stay
“green” by importing “brown.”
b) Non-economic
considerations:
i) Resource
depletion
– though see how Atkinson & Hamilton
attempt to provide a
way to
introduce depletion into an economic analysis.
ii) National
security
implications of environmental change and
resource depletion.
Notes on the
optional readings
| Atkinson,
G.
and
Hamilton, K. 2002.
International trade and
the ‘ecological balance of
payments.’ Resources
Policy 28: 27-37. |
This article provides a working definition
of sustainable
development:
- "a development path is sustainable
if welfare per capita does not decline
along the path" [27-28].
- "in order to achieve sustainability,
a country that is liquidating its
natural assets must set aside
sufficient economic resources to
finance investment in other forms of
wealth (so that substitutions of, for
example, natural and produced assets
are possible)" [28].
However, a country can use
resource-intensive imports to substitute
for depletion of domestic resources.
It's important to account for the
resource-intensity of imports before
calculating the investment a country
should be undertaking to remain
sustainable (as defined above). The
framework for the ecological balance of
payments "allows us to
calculate the derived [i.e., indirect]
demand for resources in the country of
final use”
[p.27]. The authors undertook an
empirical analysis of the direct
and indirect resource importation by EU,
Japan, and US in 1980, 1985,
and 1990.
Here, let me explain their input-output
accounting framework.
At the beginning of the quarter I noted
that a
common way to subdivide
GDP is:
GDP = C + I
+ G + X – M.
Y, or national income, is the same as
GDP. Atkinson &
Hamilton ignore G (I
presume they include government
expenditures within “consumption”), and
modify the equation for a 2-country world:
Y1
= C1 + I1 + X12
- X21 and
Y2
= C2 + I2 + X21
- X12 ,
where X12 is
the flow of exports from
Country 1 to Country 2 and X21
is the flow in the other
direction.
They create a trade coefficient q that
is
simply
qij =
Xij / Yj (the
ratio
of a country’s exports to its total GDP),
so that Xij
= qij Yj
(think of q as the export
intensity of the country’s economy) and
thus
Y1
= C1 + I1 +
q12 Y1
– q21 Y2
(in
case
algebra gives you a
headache, this equation says that a
country's total income equals its
consumption, plus its investment, plus
its export intensity times its
income, minus its import intensity times
its income.)
and then they solve for both countries
simultaneously using matrix
algebra.
They then define a “resource depletion
vector” which is basically the
value of domestic resources used in a
country per year, divided by the
country’s annual GDP, and, because they
know the resource depletion
vector for each country and they know each
country’s imports, they can
define a global resource consumption
vector that estimates the value of
domestic and foreign resources used to
satisfy a country’s C + I + X –
M in a given year.
The difference between those two resource
depletion estimates (how many resources
the country depletes to produce its
exports, minus how many resources the
country's imports deplete) is the
country’s net importing of global
resources, or its “ecological
balance of payments.”
|
| Peters,
G.P.
and
Hertwich, E.G. 2006.
Pollution
embodied in trade: the Norwegian
case. Global Environmental
Change 16: 379-387. |
The authors developed a method for
estimating the “pollution”
(specifically, CO2) emissions in the
imports, exports, and domestically
oriented production of countries,
recognizing that the emissions per
unit of production varies by country.
The article explains why consumption-based
estimates of a country's pollution may
be a better basis for environmental
negotiation than estimates based on
the location of production.
Don't worry about the technical side of
the paper
(Section 2); read it sufficiently to
have an idea of what the
authors are trying to do, with what sorts
of data.
|
| Liu,
H.,
Xi,
Y. Guo, J., and Li, X. 2010.
Energy embodied
in the international trade of China: an
energy input-output
analysis. Energy
Policy
38: 3957-3964. |
“In this paper, we evaluate the energy
embodied in goods produced in
China during 1992-2005…”
- Note that input-output (I-O)
analysis
recognizes
the precise material and service
inputs required per unit of each type
(industry) of output. This
allows you to tell the direct
requirements of each input for a unit
of output, and also to tell how
much of each material or service is
indirectly required – because each
direct input is produced by requiring
its own specific mix of inputs.
- The estimate how much energy is used
in
production
of each sort of output, by adding
“energy” sectors to the I-O matrix,
and solving for the direct and
indirect use of energy in the “export”
output sector.
“…and use input-output structural
decomposition analysis to identify
five key
factors causing the changes of energy
embodied in exports:
- direct primary energy efficiency
(how much energy per unit of
production)
- primary energy consumption structure
(how efficiently the energy is
generated)
- structure of intermediate inputs
(how many inputs of what energy
intensity)
- structure of exports (how energy
intensive is the particular mix of
exported products)
- scale of exports (how much is
exported)
|
What
are the implications of all this?
1. The
increased
production and transportation that accompany
specialization and trade
comes at
the cost of increased use of energy and
increased environmental
pollution.
2. Because
different
types of products have different energy and
emission requirements, the
country-specific impact of increased output
varies by the kinds of
products in
which a country specializes.
3. The
country-specific impact of increased output
also depends on the energy
sources
on which the country relies.
4. The
country-specific impact of increased output
also depends on the
technology used
– which will vary according to (a) overall
level of technology; (b)
factor-price ratios; and
(c)
environmental
regulation.
5. It
probably makes
sense to be as concerned with the
environmental consequences of a
country’s consumption –
whether satisfied through
domestic production or through imports – as we
have been about the
environmental consequences of a country’s production.
|