Trade liberalisation and greenhouse gas emissions: the case of dairying in the European Union and New Zealand

• Published in: The Australian journal of agricultural and resource economics Vol. 50; no. 4; pp. 538 - 555
• Main Authors: Saunders, Caroline, Wreford, Anita, Cagatay, Selim
• Format: Journal Article
• Language: English
• Published: Melbourne, Australia Melbourne, Australia : Blackwell Publishing Asia 01.12.2006; Blackwell Publishing Asia; Blackwell Publishing Ltd
• Subjects: Agricultural economics; Agricultural production; agricultural production systems; Agricultural trade; Agriculture; Climate change; Dairy industry; Dairying; Econometrics; Effects; Emissions; Emissions control; Environmental policy; Environmental protection; Europe; Europe: Commerce; Fertilisers; Global warming; Greenhouse effect; greenhouse gas emissions; Greenhouse gases; International commerce; International trade; Lincoln Trade and Environment Model; Manycountries; Methane; New Zealand; New Zealand: Commerce; Nitrous oxide; Pollution; Simulation; Studies; trade liberalisation; Trade liberalization; New Zealand; Europe; OECD; Australia; European Union
• ISSN: 1364-985X; 1467-8489
• DOI: 10.1111/j.1467-8489.2006.00343.x

The link between trade and the environment has aroused considerable interest both in terms of the impact of trade liberalisation on the environment, and also the impact of environmental policy on production and trade. Of key environmental concern at present is global warming and its association with greenhouse gas emissions. Agriculture is a sector of the economy that both contributes to, and will be affected by, climate change. This paper models the impact of agricultural trade liberalisation on greenhouse gas emissions from agriculture around the world, focusing particularly on the effects on New Zealand, a small economy highly dependent on agricultural trade. A partial equilibrium agricultural multicountry, multicommodity trade model is used for the analysis, extended to include physical production systems and their greenhouse gas emissions. Two simulations are performed: removal of agricultural policies in the EU and in all OECD countries. The results indicate that although producer returns in New Zealand increase, greenhouse gas emissions also increase significantly. EU producers face lower returns but also lower greenhouse gas emissions.