Estimating the effects of Kyoto on bilateral
trade flows using matching econometrics

Many Kyoto countries fear a loss of competitiveness due to unilateral climate policy efforts; policymakers therefore call for carbon-related border tax adjustments. With this paper we attempt to estimate the treatment effect of Kyoto commitment on bilateral export flows using regression-adjusted differences-in-differences matching techniques. The gravity and international environmental agreement formation literatures provide guidelines for the choice of matching variables. We find that Kyoto countries' exports are reduced by 13–14% due to Kyoto commitment. Trade effects are largest in energyintensive, homogeneous industries such as iron and steel, non-ferrous metals, organic and inorganic chemicals but also in machinery and equipment.