Publication: The Cost of Adjustment to Green Growth Policies : Lessons from Trade Adjustment Costs
Date
2012-10
ISSN
Published
2012-10
Author(s)
Porto, Guido
Abstract
Green growth policies confront firms and
workers with adjustments that may create welfare costs for
different segments of the population and cause reductions in
near-term actual versus potential gross domestic product.
There is little evidence on the cost of adjustment to
climate change measures, and only limited evidence for more
general environmental policies, especially in developing
countries. Therefore, this paper canvasses the research on
adjustment costs to trade policies to draw analogies and
highlight differences compared with the potential impacts of
green growth policies. Trade policies affect prices and work
directly on technology choice. In the presence of adjustment
costs, firms may experience impacts on wages, employment,
and incentives to adopt alternative technologies. Both types
of trade policy impacts may be amplified by technology
availability and credit constraints. Many green growth
policies are likely to work via the same mechanisms, that
is, taxes on emissions or changes in technology
requirements. However, trade liberalization is typically
seen as offering higher total incomes, albeit with winners
and losers. Green growth policies are thought of as
welfare-enhancing at the collective level but may not be
income-enhancing at the individual level. This implies much
more difficulty in measuring the potential gains associated
with green growth policies.
Citation
“Porto, Guido. 2012. The Cost of Adjustment to Green Growth Policies : Lessons from Trade Adjustment Costs. Policy Research Working Paper;No. 6237. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/2446ee56-7d79-5352-9441-3874064afdcd License: CC BY 3.0 IGO.”
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