How international trade impedes the green structural transformation of least developed countries

This chapter examines how a new generation of environmental policies of major trading partners may affect the export patterns of least developed countries (LDCs). Chapter 2 of this report focused on documenting key stylized facts to help contextualize the positioning of LDCs in relation to the climate emergency and the broader international debate on sustainable development. The chapter examined the material flows embodied in trade and demonstrated the imbalances in the distribution of benefits between LDCs and other countries. The present chapter builds on a gravity trade model to analyse the potential impacts on LDC trade patterns of a new generation of environmental policies that aim to expand the scale of carbon emissions placed under policy control. In particular, it examines the risk of carbon leakage and other undesirable consequences due to the unilateral nature of the proposed policies.

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