Can Global De-Carbonization Inhibit Developing Country Industrialization?

This is the question raised in a recent World Bank Working paper. The answer has to be "yes" without reading the paper. The question is the magnitude.

The numbers from the abstract to not strike me as too far off for China and India. You can bet that the Chinese and Indian government's have already worked this out - this is exactly why Copenhagen is doomed to fail

Can Global De-Carbonization Inhibit Developing Country Industrialization?

Aaditya Mattoo
World Bank - Development Research Group (DECRG)
Arvind Subramanian
International Monetary Fund (IMF); Center for Global Development
Dominique Van der Mensbrugghe
World Bank
Jianwu He
affiliation not provided to SSRN

World Bank Policy Research Working Paper No. 5121

Abstract:
Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. The authors depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, they decompose the impact of an agreement on emissions reductions into three components: the change in the price of carbon due to each country’s emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are not adversely affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 6-7 percent and manufacturing exports by 9-11 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the Dutch disease effects of transfers hurt exports most. If the growth costs of these structural changes are judged to be substantial, the current policy consensus, which favors emissions tradability (on efficiency grounds) supplemented with financial transfers (on equity grounds), needs re-consideration.

Keywords: Climate Change Mitigation and Green House Gases, Climate Change Economics, Environment and Energy Efficiency, Energy and Environment, Carbon Policy and Trading

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