Toward inclusive list-making for trade liberalization in environmental goods to reduce carbon emissions

Abstract

The Asia-Pacific Economic Cooperation (APEC) is contemplating expanding its list of environmental goods (EG) for trade liberalization to fight climate change. In support of doing so, this study proposes that a long list that retains controversies is better for carbon emission reduction than a short common list. This study examines four mechanisms of longer lists: enlarging market scales, enriching product mixes, enhancing product sophistication, and enriching trade patterns. Using China’s emerging EG trade during the 2001–2015 period as a case study, this study compares four EG lists with different EG. The results show that: (1) a longer list reduces carbon emissions from both imports and exports, making domestic regions with different advantages have better chances of improving carbon efficiencies. (2) Product sophistication reduces the emission gap between trading partners, regardless of the length of EG lists. (3) China’s EG exports contribute to carbon reduction in leading regions, while EG imports provide laggard regions with better chances of reducing carbon emissions. These findings provide three implications for future list-making: it is important to (1) seek a long and inclusive list rather than a short common list, (2) shift the focus from environmental end-use to the technological contents of products, and (3) balance the demand of laggard regions to import and the capacity of leading regions to export.