Thomas Fox Rutherford

• University of Wisconsin–Madison

Border carbon taxes are considered as an important instrument to promote sustainable practices abroad and to level the playing field for domestic emission‐intensive and trade‐exposed (EITE) industries. We find that US emissions pricing plays a critical role in the effectiveness of border carbon taxes in protecting the international competitiveness...

We construct a 45-sector model of Ukraine with Turkey and seven other regions to estimate the impacts on Ukraine of effectively implementing the deep Free Trade Agreement (FTA) it concluded with Turkey on February 3, 2022. Econometric evidence shows that the impacts of Preferential Trade Agreements (PTAs) are much greater than can be explained by t...

This article summarizes insights from the 36th Energy Modeling Forum study (EMF36) on the magnitude and distribution of economic adjustment costs of greenhouse gas emission reduction targets. Under the Paris Agreement, countries have committed to emission reduction targets – so-called Nationally Determined Contributions (NDCs) – in order to combat...

We investigate the economic impacts of CO2 emissions pricing for Germany in the context of the Paris Agreement where we highlight the role of international market responses for the incidence across heterogeneous households. We consider three settings for international spillover effects: (i) a small-open-economy framework where international commodi...

Alternative perspectives on the structure of international trade have important implications for the evaluation of climate policy. In this paper, we assess climate policy in the context of three important alternative trade formulations. First is a Heckscher-Ohlin model based on trade in homogeneous products, which establishes the traditional neocla...

Foreign producer services can provide substantial benefits for domestic firms. We build on earlier monopolistic-competition models of intermediate producer services in this paper. Results show that: (1) while foreign services are partial-equilibrium substitutes for domestic skilled labour, they may he general-equilibrium complements, (2) service tr...

This paper describes the implementation in the General Algebraic Modeling Language (GAMS) of an economic equilibrium model based on the Global Trade Analysis Project (GTAP) dataset. We call this model and the ancillary programming tools GTAPinGAMS. Relative to previous installments of GTAPinGAMS, an innovation in this model is that it can easily sw...

This paper investigates the economic and environmental impacts of tariffs on carbon embodied in trade. We find that carbon tariffs do reduce foreign emissions, but their ability to improve global cost-effectiveness of unilateral climate policy is quite limited – even if tariff rates are based on more sophisticated second-best considerations. If car...

We ask whether the threat of carbon tariffs might lower the cost of reductions in world carbon emissions by inducing unregulated regions to adopt emission controls. We use a numerical model to generate payoffs of a game in which a coalition regulates emissions and chooses whether to employ carbon tariffs against unregulated regions. Unregulated reg...

We investigate the environmental impacts of Russia's World Trade Organization (WTO) accession with a computable general equilibrium model incorporating imperfectly competitive firms, foreign direct investment and endogenous productivity. WTO accession increases CO2 emissions through technique (−), composition (+) and scale (+) effects. We consider...

Emissions offset schemes, such as the Clean Development Mechanism established under the Kyoto Protocol and sectoral crediting schemes which are currently discussed as a new market-based mechanism within the United Nations Framework Convention on Climate Change, allow industrialized Annex I countries to offset part of their domestic emissions by inv...

This chapter considers alternatives to the Armington formulation of international trade found in most computable general equilibrium (CGE) models. International trade structures consistent with the monopolistic competition models suggested by Krugman (1980) and Melitz (2003) are presented in a computational setting. The Melitz structure of heteroge...

We describe the progress of computable general equilibrium (CGE) modeling software since the 1980s and contrast the main systems used today: GAMS, MPSGE and GEMPACK. The development of these general-purpose modeling systems has underpinned rapid growth in the use of CGE models, and allowed models to be shared and their results replicated. We show h...

We decompose the economic implications of the Kyoto Protocol at the cross-country level, splitting the total economic impact for each region into contributions from its own emission abatement policy and those from other regions. Our analysis which is based on a large-scale computable general equilibrium model for the world economy indicates that sp...

In the transition to sustainable economic structures the European Union assumes a leading role with its climate and energy package which sets ambitious greenhouse gas emission reduction targets by 2020. Among EU Member States, Poland with its heavy energy system reliance on coal is particularly worried on the pending trade-offs between emission reg...

Subglobal climate policies induce changes in international competitiveness and favor a relocation of carbon-emitting activities to non-abating regions. In this paper, we evaluate the potential for CO2 abatement and the emissions 'leakage' effect in the copper industry, a prominent energy-intensive trade-exposed sector. We formulate a plant-level sp...

Unilateral carbon policies are inefficient due to the fact that they generally mean that abatement takes place in high-cost countries and because they are subject to carbon leakage. In this paper, we ask whether the use of carbon tariffs — tariffs on the carbon embodied in imported goods — might lower the cost of achieving a given reduction in worl...

Issues of emission leakage and competitiveness are at the fore of the climate policy debate in all the major economies implementing or proposing to implement substantial emission cap-and-trade programs. Unilateral climate policy cannot directly impose emission prices on foreign sources, but it can complement domestic emission pricing with border ca...

We analyze subglobal action to mitigate climate change with a consideration of recent advances in the theory of international trade. Subglobal action impacts emissions in unconstrained countries (carbon leakage) through international trade channels. Consequently, estimates of the efficacy of subglobal action, tariffs on embodied carbon, and the dis...

We develop a seven region comparative static computable general equilibrium model of Russia to assess the impact of accession to the World Trade Organization (WTO) on households and poverty in its seven federal regions. Crucially, our model allows for foreign direct investment in business services and endogenous productivity effects from additional...

neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar. Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely respo...

Subglobal climate policies induce changes in international competitiveness and favor a relocation of carbon-emitting activities. We argue that many energy-intensive activities are also capital-intensive, so that carbon policies could affect rents rather than abatement or location. Taking copper as an example, we formulate a plant-level spatial equi...

In a world where the prospects of a global agreement to control greenhouse gas emissions are bleak, the idea of using trade policy as an implicit regulation of foreign emission sources has gained many supporters in countries contemplating unilateral climate policies. Embodied carbon tariffs tax the direct and indirect carbon emissions embodied in i...

We evaluate the welfare implications of alternative ways in which the EU could distribute its aggregate emission reduction commitment under the Kyoto Protocol across member states. An endogenous burden sharing calculation, in which the welfare costs across member states are equalized, differs substantially from uniform proportional cutbacks as well...

We explore two methods of incorporating bottom-up abatement cost estimates into top-down modeling: economy-wide and sector-specific. Carbon emissions depend basically on technology and scale. Given the technology options, abatement is possible without a substantial reduction in scale. Otherwise the change must come purely through a reduction in dem...

Top-down models usually include piecewise-smooth functions to describe marginal cost curves, while bottom-up models describe those curves with a step function. When a bottom-up cost curve is available, we can explicitly represent this curve with a top-down model in order to replicate its shape instead of arbitrary assumptions. We propose methods to...

Bottom-up estimates of abatement cost impact public perceptions regarding the feasibility of greenhouse gas abatement; yet these estimates are narrowly defined on a partial equilibrium basis. This paper explores the extent to which policy conclusions depend on how bottom-up assessments of greenhouse gas abatement options are integrated into top-dow...

Bottom-up estimates of abatement cost impact public perceptions regarding the feasibility of greenhouse gas abatement; yet these estimates are narrowly defined on a partial equilibrium basis. This paper explores the extent to which policy conclusions depend on how bottom-up assessments of greenhouse gas abatement options are integrated into top-dow...

Rutherford T. F. and Torma H. Efficiency of fiscal measures in preventing out-migration from North Finland, Regional Studies. This paper introduces a computable general equilibrium (CGE) model for the Finnish regional economy, RegFin. This multi-sector and interregional model characterizes economic activity in the regions of Lappi, Pohjois-Pohjanma...

In this paper, the authors develop a 10-region comparative static computable general-equilibrium model of Russia to assess the impact of accession to the World Trade Organization on the regions of Russia. The model allows for foreign direct investment in business services and endogenous productivity effects from additional varieties of business ser...

Carbon control policies in OECD countries commonly differentiate emission prices in favor of energy-intensive industries. While leakage provides a efficiency argument for differential emission pricing, the latter may be a disguised beggar-thy-neighbor policy to exploit terms of trade. Using an optimal tax framework, we propose a method to decompose...

Canada has committed itself under the Kyoto Protocol to reduce greenhouse gas emissions between 2008 and 2012 on average by six per cent from the base 1990 level. As of 2009, however, Canada’s greenhouse gas emissions are far above its 1990 level which calls for stringent short-term policy measures if Canada is to meet its legally binding commitmen...

The Harvard Project on International Climate Agreements is a global, multi-disciplinary effort intended to help identify the key design elements of a scientifically sound, economically rational, and politically pragmatic post-2012 international policy architecture for addressing the threat of climate change. It has commissioned leading scholars to...

In its fight against climate change the EU is committed to reducing its overall greenhouse gas emissions to at least 20% below 1990 levels by 2020. To meet this commitment, the EU builds on segmented market regulation with an EU-wide cap-and-trade system for emissions from energy-intensive installations (ETS sectors) and additional measures by each...

The analysis presented here follows the design specified by the Energy Modeling Forum (EMF) Transition Scenarios study on achieving climate stabilization goals with delayed participation by developing countries. We use the MERGE model to evaluate the core EMF scenarios for both the international and the US-specific studies. Our results indicate tha...

Three computable general equilibrium models are used to estimate the economic implications of a stylized version of EU climate policy. If implemented at the lowest possible cost, the 20% emissions reduction would lead to a welfare loss of 0.5-2.0% by 2020. Second-best policies increase costs. A policy with two carbon prices (one for the ETS, one fo...

We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries’ decisions...

In the current political environment, it is highly unlikely that all countries will agree to take on immediate commitments to reduce their greenhouse gas emissions. In particular, developing countries will look to their wealthier neighbors to be the “first movers.” In this paper, we assume that developing countries will eventually accede to an inte...

Recent analysis across several trade theories suggests that, given appropriate calibration, trade and welfare are insensitive to the particular industrial organization. We show that industrial organization does matter, once we consider a second sector that competes for factor services.

The formulation of market equilibrium problems as mixed complementarity problems (MCP) permits integration of bottom-up programming models of the energy system into top-down general equilibrium models of the overall economy. Despite the general appeal of the integrated MCP approach, dimensionality imposes limitations on practical application. A com...

A highly disaggregated, “tariff line,” source-differentiated, partial equilibrium model of U.S. specialty cheese imports is developed to investigate reform options for tariff-rate quotas (TRQs). A mixed-complementarity framework is used to represent bilateral and most favored nation (MFN) tariff quotas. The impacts of liberalizing U.S. specialty ch...

Despite economic theory and empirical literature that have shown that wide availability of business services contributes significantly to productivity gains and growth, economic modelers have been slow to meaningfully incorporate services into their models. This paper employs a 52-sector, small, open-economy computable general equilibrium model of...

This paper develops a decomposition algorithm by which a market economy with many households may be solved through the computation of equilibria for a sequence of representative agent economies. The paper examines local and global convergence properties of the sequential recalibration (SR) algorithm. SR is then demonstrated to efficiently solve Aue...

This paper develops a seven-region comparative static computable general equilibrium model of Russia to assess the impact of accession tothe World Trade Organization on these seven regions (the federal okrugs) of Russia. In order to assess poverty and distributional impacts, the model includes ten households in each of the seven federal okrugs, whe...

This paper employs a 55 sector small open economy computable general equilibrium model of the Kenyan economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Kenya. The model incorporates foreign direct investment in business services and productivity effects in imperfectly...

Recently, hybrid models of the energy-economy have been developed with the objective of combining the strengths of the traditional top-down and bottom-up approaches by simulating consumer and firm behavior at the technological level. We explore here the application of discrete choice research and modeling to the empirical estimation of key behavior...

We employ a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO) on income distribution and the poor. We incorporate all 55,098 households from the Russian Household Budget Survey as agents in the model. The model includes FDI in services and Dixit–Stiglitz endogenous pr...

We present a dynamic general equilibrium model of the U.S. economy and the medical sector in which the adoption of new medical treatments is endogenous and the demand for medical services is conditional on the state of technology. We use this model to prepare 75-year medical spending forecasts and a projection of the Medicare actuarial balance, and...

Recent growth in carbon dioxide emissions from China's energy sector has exceeded expectations. In a major US government study of future emissions released in 2007 (1), participating models appear to have substantially underestimated the near-term rate of increase in China's emissions. We present a recalibration of one of those models to be consist...

We present an empirical implementation of a general-equilibrium model of international trade with heterogeneous manufacturing firms. The theory underlying our model is consistent with Melitz (2003). A nonlinear structural estimation procedure identifies a set of core parameters and unobserved firm-level trade frictions which best fit the geographic...

Recent growth in carbon dioxide emissions from China’s energy sector has exceeded expectations. In a major US government study of future emissions released in 2007 (1), participating models appear to have substantially underestimated the near-term rate of increase in China’s emissions. We present a recalibration of one of those models to be consist...

General equilibrium (GE) models have been criticized because of policy aggregation issues. Partial equilibrium (PE) models can be more disaggregated but do not account for the economy-wide effects from trade reform. In this article, we illustrate a methodology that combines a fully disaggregated, subsector (PE) model with a standard GE framework pe...

We present an empirical implementation of a general-equilibrium model of international trade with heterogeneous manufacturing firms. The theory underlying our model is consistent with Melitz (2003). A nonlinear structural estimation procedure identifies a set of core parameters and unobserved firm-level trade frictions that best fit the geographic...

This paper develops a decomposition algorithm by which a market economy with many households may be solved through the computation of equilibria for a sequence of representative agent economies. The paper examines local and global convergence properties of the sequential recalibration (SR) algorithm. The SR algorithm is then demonstrated to efficie...

Climate change is a long-term problem. Efficient policy responses to cope with climate change involve the choice of policy instruments and their timing. We present an intertemporal framework where we can study the trade-off between emission taxes and innovation (R&D) subsidies as a means to cope with long-term emission constraints. A stochastic pro...

In this paper a computable general equilibrium model of the Russian economy is used to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, Russian tariff reduction, and reduction of barriers against multinational service providers. It is assumed that foreign direct investment in business s...

It is becoming increasingly clear that economically efficient climate policies are unlikely to be implemented in the near term. Therefore an analysis is warranted that considers the implications of certain suboptimal transition policies. This analysis constructs a transition scenario based on realistic assumptions about the current trends in policy...

In this paper we develop a computable general equilibrium model of the regions of Russia to assess the impact of accession to the World Trade Organization (WTO) on the regions of Russia. We estimate that the average gain in welfare as a percentage of consumption for the whole country is 7.8 percent (or 4.3 percent of consumption); we estimate that...

What can Russia gain from committing to reform its telecommunications sector as part of its accession to the World Trade Organization (WTO)? We employ a computable general equilibrium model of the Russian economy that incorporates foreign direct investment (FDI). Liberalization of barriers to FDI in services sectors results in endogenous productivi...

In this paper, we consider a three-stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform (Most Favored Nation, MFN) tariffs on countries' choice over environmental standards for varying degrees of pollution spillovers. Because of the presence of punishment effects and stronger own...

In this paper we develop a computable general equilibrium model of the regions of Russia to assess the impact of accession to the World Trade Organization (WTO) on the regions of Russia. We estimate that the average gain in welfare as a percent of consumption for the whole country is 7.8 percent (or 4.3 percent of consumption); we estimate that thr...

The formulation of market equilibrium problems as mixed complementarity problems (MCP) permits integration of bottom-up programming models of the energy system into top-down general equilibrium models of the overall economy. Despite the coherence and logical appeal of the integrated MCP approach, implementation cost and dimensionality both impose l...

Taking price changes from the Global Trade Analysis Project (GTAP) model of world trade, the authors use a small open economy computable general equilibrium comparative static model of the Russian economy to assess the impact of global free trade and a successful completion of the Doha Agenda on the Russian economy, and especially on the poor. They...

The Kyoto agreement as originally drafted sought to mitigate anthropogenic greenhouse gas emissions through policy measures by most industrialized countries. It now seems likely that the agreement will be ratified and implemented without the participation of the United States. Any emissions abatement policies which have a measurable reduction in gl...

In World Trade Organization (WTO) accession negotiations, telecommunications is always a sector that receives close scrutiny by the WTO Working Party, and the extent of market access and nondiscriminatory treatment of multinational telecommunications companies in Russia has been a significant issue in Russia’s accession negotiations. The authors us...

The authors use a computable general equilibrium comparative static model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO) on income distribution and the poor. Their model is innovative in that they incorporate all 55,000 households from the Russian Household Budget Survey as"real"households in the mode...

Foreign producer services can provide substantial benefits for domestic firms. We build on earlier monopolistic-competition models of intermediate producer services in this paper. Results show that: (1) while foreign services are partial-equilibrium substitutes for domestic skilled labour, they may be general-equilibrium complements, (2) service tr...

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. In our formulation the economic and natural science components are processed independently on different time scales. Turnpike properties of the Ramsey growth model can be exploited to provide a precise repr...

We motivate the formulation of market equilibria as a mixed complementarity problem (MCP) in order to bridge the gap between bottom-up energy system models and top-down general equilibrium models for energy policy analysis. Our objective is primarily pedagogic. We first lay out that the MCP approach provides an explicit representation of weak inequ...

The success of any international climate change agreement depends on abatement targets and the incentives for countries to participate. We demonstrate that international emission trading is effective in making headway on both issues despite the assumption that countries choose their permit endowments non-cooperatively. Developing countries are lure...

MPSGE is a non-algebraic language for the formulation of applied general equilibrium models. When you build a model using MPSGE you do not need to specify equations, but you instead work with a tabular representation of the model. The input tables make reference to source statistics, typically drawn from a single benchmark year. MPSGE input data de...

Gains from productivity and knowledge transmission arising from the presence of foreign firms has received a good deal of empirical attention, but micro-foundations for this mechanism are weak . Here we focus on production by foreign experts who may train domestic unskilled workers who work with them. Gains from training can in turn be decomposed i...

We study the role of technology subsidies in climate policies, using a simple dynamic equilibrium model with learning-by-doing. The optimal subsidy rate of a carbon-free technology is high when the technology is first adopted, but falls significantly over the next decades. However, the efficiency costs of uniform instead of optimal subsidies, may b...