Does the current trade liberalization agenda contribute to greenhouse-gas emission mitigation in agriculture?

The parallel development of trade liberalization and GHG reduction policies raises the question on their interplay. Whether a continuous liberalization of the agri-food markets contributes positively to emission mitigation efforts is a complex empirical question. Existing empirical evidence on the net aggregated effect of trade and trade liberalization on global emissions is mixed hinting towards the case specificity of the results. The theoretical framework of the trade-liberalization – GHG emissions nexus builds around three main effects. The scale effect, i.e. that liberalized trade boosts production and consumption, increases global GHG emissions. The composition effect, i.e. that facilitating trade also changes the composition of the goods produced and consumed, depends on how emission intensive the industries that gain from trade liberalization are. The technology effect, i.e. that liberalizing trade also creates and increases technological development and technology transfer, unequivocally leads to a reduction in global emissions by promoting more efficient and environmentally friendly production technologies. However, the net result of these three effects cannot be solved theoretically and remains an empirical question Against this background, this paper aims to provide a detailed analysis on how trade liberalization agreements may affect the efficiency of possible EU mitigation policies in agriculture. More specifically, we investigate the impact of a number of regional Free Trade Agreements (FTA) that the EU is currently negotiating, while a carbon price policy for EU agriculture aiming at reducing (non-CO2) GHG emissions is in place.

JRC.D.4 - Economics of Agriculture