International trade spillovers and vague politicians

The term „globalization„ is one of the most defining expressions in the last decades. A second term, „climate change“, has arrest great attention in recent years. A concomitant of globalization in particular and of the economic development since the industrial revolution in general is the large consumption of fossil fuels leading to emissions of high amounts of greenhouse gases. This dissertation analyses the interaction of the both terms and asks how impacts of climate change are distributed through the international trading system and thus changes the assessment of costs of global warming and in consequence climate policies. In Chapter 2 we study exactly how the costs of climate change can spread across regions through international trade with a climate sensitive, dynamic computable general equilibrium model. By means of a decomposition method it is shown that there is a spillover of damages through international trade and this has a significant influence on total costs of climate change for a region. For regions with low exposure to climate change and high adaptive capacities, those spillover effects can be responsible for a third of total costs from climate change. If due to funding of adaptation measures in foreign countries these indirect climate change costs can be reduced, such a funding might be beneficial also for the funding region. Chapter 3 examines this question in a theoretical and a numerical model. It shows that funding of adaptation has a positive welfare effect for the donor and it is in the self-interest of the industrialized nations to fund strategically adaptation in the developing parts of the world. Chapter 4 closes the carbon cycle and extends our working horse model to a full fledged integrated assessment model. We study then the strategic interactions between international trade and climate policy with a focus on the effectiveness of border carbon adjustments. First, we analyse the main principles of unilateral climate policy and international trade in an analytical model. Second, we investigate welfare effects of carbon import tariffs in the numerical model in order to analyse if border carbon adjustments are a credible threat to force non-abating countries to implement stricter climate policies. The last chapter illuminates another challenge for assessing climate policy measures. Chapter 5 examines the consequences of policy uncertainty on the emission path of China. China is the world's largest emitter of greenhouse gases and responsible for one-fifth of world's emissions from power generation. Chapter 5 investigates with a stochastic dynamic computable general equilibrium model the role of uncertainty in China's climate policy on investments in the electricity sector and its consequences for carbon emissions. The results show that uncertainty about the timing and extent of China's climate policy lowers emissions compared to a world with perfect information. Overall, this thesis should highlight some of the challenges of a proper assessment of costs and benefits of climate change and the policy measures to cope with.