TradeinLowCarbonTechnologies: TheRoleofClimateandTradePolicies SamuelPienknaguraWP/24/75 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2024 MAR ©2024InternationalMonetaryFundWP/24/75 IMFWorkingPaper ResearchDepartment TradeinLowCarbonTechnologies:TheRoleofClimateandTradePoliciesPreparedbySamuelPienknagura* AuthorizedfordistributionbyFlorenceJaumotte March2024 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:CurbingcarbonemissionstomeetthetargetssetintheParisAgreementrequiresthedeploymentoflowcarbontechnologies(LCTs)ataglobalscale.ThispaperassessestheroleofclimateandtradepoliciesinfosteringLCTdiffusionthroughtrade.Leveragingacomprehensivedatabaseofclimatepoliciesandanewdatabaseidentifyingtradeinlowcarbontechnologiesandthetariffsappliedtothesegoods,thispapershowsthattheintroductionofnewclimatepolicieshasapositiveandsignificantimpactonLCTimports.Zoomingintospecificclimatepolicies,thepaperfindsthat,exceptfornon-bindingones,allclimatepoliciesstimulateLCTimports.ThepaperalsohighlightstheroleoftradepoliciesasanengineofLCTdiffusion—reductionsintariffsappliedonLCTgoodshaveasizeableimpactonLCTimports.Ontheflipside,resultssuggestthatmoreprotectionistmeasureswouldimpedethespreadoflow-carbontechnologies. RECOMMENDEDCITATION:“TradeinLowCarbonTechnologies:TheRoleofClimateandTradePolicies,”bySamuelPienknagura,IMFworkingpaper,2024. JELClassificationNumbers: F14,F18,Q55,Q58 Keywords: Climatepolicies;trade;lowcarbontechnologies;technologicaldiffusion. Author’sE-MailAddress: spienknagura@imf.org IMFWORKINGPAPERSInflatedConcerns:ExposuretoPastInflationaryEpisodesandPreferencesforPriceStability WORKINGPAPERS TradeinLowCarbonTechnologies: TheRoleofClimateandTradePolicies PreparedbySamuelPienknagura1 1IthankHasanDudu,ZeinaHasna,AndrewHodge,FlorenceJaumotte,AmitKara,GeoffreyKeim,KoralaiKirabaeva,GregorSchwerhoff,andNateVernonforcommentsandsuggestions.TheviewsexpressedinthepaperarethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. INTERNATIONALMONETARYFUND3 TradeinLowCarbonTechnologies:TheRoleofClimateandTradePolicies∗ SamuelPienknagura†April2024 Abstract CurbingcarbonemissionstomeetthetargetssetintheParisAgreementrequiresthedeploymentoflowcarbontechnologies(LCTs)ataglobalscale.Thispaperas-sessestheroleofclimateandtradepoliciesinfosteringLCTdiffusionthroughtrade.Leveragingacomprehensivedatabaseofclimatepoliciesandanewdatabaseidentifyingtradeinlowcarbontechnologiesandthetariffsappliedtothesegoods,thispapershowsthattheintroductionofnewclimatepolicieshasapositiveandsignificantimpactonLCTimports.Zoomingintospecificclimatepolicies,thepaperfindsthat,exceptfornon-bindingones,allclimatepoliciesstimulateLCTimports.ThepaperalsohighlightstheroleoftradepoliciesasanengineofLCTdiffusion—reductionsintariffsappliedonLCTgoodshaveasizeableimpactonLCTimports.Ontheflipside,resultssuggestthatmoreprotectionistmeasureswouldimpedethespreadoflow-carbontechnologies. Keywords:Climatepolicies,trade,lowcarbontechnologies,technologicaldiffusion. JELClassification:F14,F18,Q55,Q58 ∗IthankHasanDudu,ZeinaHasna,AndrewHodge,FlorenceJaumotte,AmitKara,GeoffreyKeim,KoralaiKirabaeva,GregorSchwerhoff,andNateVernonforcommentsandsuggestions.TheviewsexpressedinthepaperarethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutive Board,orIMFmanagement. †InternationalMonetaryFund;e-mail:spienknagura@imf.org 1Introduction Curbinggreenhousegas(GHG)emissionsisaglobalpriorityinthefightagainstcli-matechangeanditsadverseconsequencesforeconomicandfinancialstability.Keytothisobjectiveisthedeploymentoflow-carbontechnologies(LCTs)(Rogelji,Shindell,andJiang2018).ThedeploymentofLCTsisespeciallyimportantinemergingmarketanddevelop-ingeconomies(EMDEs),whichtypicallyarenotproducersofLCTsandhavemuchhigheremissionsperunitofoutputthanadvancedeconomies(seeCapelleetal.,2023)andwheretheadoptionofLCTscanresultinsubstantialemissionreductions(GlennersterandJay-achandran,2023).Yet,policyandstructuralfactorscanaffectthediffusionofLCTsacrosscountries.1Muchemphasishasbeenrecentlygiventotheimportanceofexpadingclimate-relatedfinance(IMF,2023a).Lessisknown,however,aboutthepotentialcatalyticrolethatclimateandtradepoliciescanplayinpromotingLCTdiffusionataglobalscale. Thispaperstudiestheroleofclimateandtradepoliciesinboostingthediffusionoflowcarbontechnologies(LCTs)throughtrade.Leveragingacomprehensivedatabaseofclimatepolicies,andnoveldatabasescapturingtheevolutionofLCTtradeandtariffsacrosscountries,IestimatethedynamicimpactofbothchangesinthenumberclimatepoliciesandintariffsappliedtoLCTgoodsthroughthelocalprojectionsmethodproposedbyJorda`(2005).