Trade Regulation of Environmental Goods in an Oil Producing Economy : A Computational General Equilibrium Analysis on Abu Dhabi

The reduction of trade barriers for environmental goods and services has been proposed by the World Trade Organization (WTO), Organization for Economic Co-operation and Development (OECD), and the Asia-Pacific Economic Cooperation (APEC) as one of the means to diffuse clean technologies. This paper examines the economic and environmental effects of the three proposed trade regulation schemes on oil producing economies using Abu Dhabi as an example. Using administrative trade data, a Computable General Equilibrium (CGE) model calibrated with Abu Dhabi's social accounting matrix is developed to analyze industrial outputs and CO2 emissions reductions by sectors. The results shows that an elimination of import tariff for environmental goods lead to a drop in GDP by 0.012%, 0.014%, 0.027%, and reduction of CO2 emissions by 0.015%, 0.018%, and 0.036% respectively under the WTO, APEC, and OECD proposals. The manufacturing and the construction industries contribute to most of the CO2 emission reductions. While the OECD proposal reduces most CO2 emissions, the elasticity of GDP change to Carbon emissions change are similar across all proposals