The impact of the transatlantic trade and investment partnership on agri-food trade and greenhouse gas emissions in the EU : an environmentally extended input-output analysis

University essay from SLU/Dept. of Economics

Abstract: To reach the goals set out by the Paris Agreement of limiting global warming to well below 2°C, significant reductions in greenhouse gas emissions driving climate change are required by all actors in society. The European Union has set ambitious targets to reduce its emissions by a minimum of 40% until 2030. At the same time, the EU and the United States are negotiating a Transatlantic Trade and Investment Partnership, aiming at creating the largest free trade area in the world and increase trade, boost growth and create employment on both markets. As all economic activities, such an agreement will have environmental consequences. Thus far, critique towards the agreement from an environmental perspective has primarily been concerned with the possibility of a “race to the bottom” of environmental regulation in the name of free trade. Less attention has been paid to investigate the environmental impact of the strictly economic consequences which are desired from both parties. This study investigates the environmental impact of the TTIP, in terms of greenhouse gas emissions related to several best case scenarios of economic effects. The environmentally extended input-output analysis provides a tool for integrated national and environmental accounting which can be used to visualize the environmental impact of a trade agreement. The GTAP (Global Trade Analysis Project) database is in this study used for extraction of a corresponding Input-Output table for the European Union, on which simulations of the economic impact of TTIP is computed, based on findings from previous CGE models developed by researchers in both Europe and the U.S. Henceforth, the economic impacts of increased exports and imports are translated into GHG emissions associated with the demand driven change in production and supply driven change in consumption of agricultural and food products within the region, using trade and emissions data for every product in the sector. The result show a large discrepancy in the GHG impact of the TTIP between previous CGE models. The projections from the USDA scenario would lead to a net reduction in EU GHG emissions from the agri-food sector of 6.4 million tons CO2 equivalents (-1.4 percent), led by a reduction in export demand and corresponding output. The CEPR scenario would lead to an increase in EU GHG emissions of 28.1 million tons CO2 equivalents (5.9 percent), led by marginal increases in output and final demand. The projections from the European Parliament would in turn lead to a net increase in GHG emissions of 88.7 million tons CO2 equivalents (18.8 percent), led primarily by large and potentially overestimated percentage increases in export demand. The differences between the outcomes are mainly due to computational differences in the CGE models used, specifically the inclusion and quantification of non-tariff measures. Consistently throughout the scenarios, changes in trade flows in meat and dairy products amount for 65-80% of the emissions impact. Since the TTIP may potentially influence the climate goals of the EU, specific reference to the global climate efforts in the sustainability chapter is highly recommended.

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