Jiayi Wang (p)

Davide Rognini

As climate change accelerates, governments are adopting market-based policies to drive low-carbon transitions. China, the world’s largest carbon emitter and a key global economy, has introduced a carbon emissions trading system (ETS) to regulate industrial emissions while incentivising green technological innovation. Following the European Union’s Emissions Trading System (EU-ETS), China launched regional pilot programs in 2013 before establishing a national carbon market in 2021. While existing studies have assessed carbon trading’s impact on emissions reduction and economic performance, its role in stimulating green innovation remains underexplored—especially across different firm types and regional policy environments.

This study investigates whether and how China’s ETS fosters green innovation, considering firm heterogeneity, carbon quota pricing, and regional policy differences. Focusing on emission-control enterprises in pilot regions from 2010 to 2021, this study employs a triple-difference (DDD) approach, using listed firms’ green patent applications as a proxy for innovation. Additionally, leveraging carbon market trading data from 2014 to 2021, the study explores the relationship between carbon allowance prices and firms’ innovation intensity, incorporating a heterogeneity analysis across firm size, ownership structure, and industry characteristics. By integrating firm-level patent data with carbon market transaction records, this research provides a comprehensive evaluation of how emissions trading policies influence corporate innovation strategies across different regional contexts.

The findings reveal that China’s ETS has a significant but uneven impact on green technological innovation. State-owned enterprises and large firms tend to benefit more, whereas smaller firms face financial and technological barriers to innovation. Additionally, a stable and well-calibrated carbon allowance price is crucial—prices that are too low fail to drive innovation, while excessive volatility may discourage long-term R&D investments. These results provide critical policy insights into the role of carbon markets as financial instruments for advancing regional sustainability strategies. The study contributes to discussions on regional policy, cohesion policy, and policy assessment, offering guidance for optimising carbon trading mechanisms to support industrial decarbonisation, technological advancement, and regional economic resilience.

Davide Rognini (p), Patrizio Lecca, Jorge Díaz-Lanchas

Dimitrios Karkanis

This paper explores the potential impact of an Association Agreement (AA) between Andorra and the European Union (EU), through a two-country multi-sector computable general equilibrium (CGE) model. The signing of this AA arises from a dual perspective. On the EU side, recent global trends such as geopolitical tensions, protectionism, and the influence of new economic powers like China have pushed European institutions to shift towards a regionalization strategy, strengthening the links with closer and “like-minded” countries. Andorra’s perspective focuses on compensating for many of the drawbacks that literature attributes to small countries, namely reduced domestic markets and resources and higher trade openness and volatility.

Currently, Andorra’s economy is already closely integrated with the EU, yet it remains outside the European Economic Area (EEA). This paper models the AA through two key aspects: first, a reduction of tariffs on agricultural products (the last category still facing barriers), and second, a liberalization of service sectors through Non-Trade-Barrier reduction. The model draws data from a regional IO table especially designed for this study based on Andorra’s national input-output tables and EU trade data, accounting for 18 economic sectors.

The results indicate that the AA positively addresses many of the drawbacks of a small country, such as Andorra, enhancing competitiveness and reducing inefficiencies and suboptimality problems. However, this may worsen the sectoral and geographical specialization of the country, deepening the relationship with its major trade partner and making it more vulnerable to possible shocks in the EU. On the other hand, the AA highlights the importance of regionalization for the EU as a strategy to foster regional integration in an adverse world conjuncture towards liberalization despite a relatively minor and slightly negative effect for the EU. While the EU’s populist sentiments may remain intact, these agreements may offer a common solution and strategy to tackle deglobalization.

This paper contributes to the academic understanding of free trade agreements in the context of small states, shedding light on the potential economic transformation that may result from deeper integration with the EU, with implications for policy-making and future trade negotiations.

Kadriye Kardelen Güzel, Dimitrios Karkanis (p), Amélie Bourceret, Paolo Prosperi, Georgios Kleftodimos

Roberta Arbolino

During the recent years, Greece has been one of the EU members producing the most valuable output in the farmed fished sector. According to the Hellenic Aquaculture Producers Organisation (HAPO) and the Food and Agriculture Organisation (FAO), aquaculture accounts recently for about two-thirds of the domestic fish production, leading to job creation for both permanent and temporary staff. The aim of the present study is to delve into the constraints and challenges related to the expansion prospects of the fish export industry in Greece, by comparing the country’s sectoral export pattern with other major fish-exporting EU members. The methodological approach will be mainly based on the structural gravity model analysis, while the period under study will extend from 1995 to 2023, based on data availability. For this purpose, statistical data on Greece’s and on several selected EU members’ bilateral fish trade with third countries will be employed by the UN COMTRADE dataset. The effect of bilateral differences in productivity will be assessed by using estimates of the revealed comparative advantages by product category for Greece, based on Ricardian trade theory, already available in the UNCTADStat database and based on the 3-digit SITC classification. Other necessary data will derive from the CEPII and the World Bank database. The empirical results are expected to provide useful insights and update economic policies for a growing export sector in the Greek case.

Roberta Arbolino (p), Raffaele Boffardi, Nicola Spagnolo

Jiayi Wang

In recent years, the intensification of global protectionist tensions, as demonstrated by the trade war between the US and China that began in 2018, has raised questions about the indirect impact of international trade shocks on third-party economies. This study analyzes whether and to what extent a reduction of exports from some European regions to the United States - induced by tariff barriers - can generate a reallocation of sales to other regions of the European Union, leading to intra-EU trade diversion.
The analysis is developed at sub-national level (NUTS-2) and adopts the methodology of local projections (Jordà, 2005) to dynamically estimate the effect of an exogenous trade shock on intra-European import flows. The shock measure is based on the variation of US tariffs imposed between 2018 and 2025 on specific sectors, allowing a plausible exogenous identification. The basic assumption is that the regions affected by the contraction of US demand will redirect part of their production towards European domestic markets, with heterogeneous effects depending on the pre-existing trade structure, the sectoral substitutability of goods, the stage of the prevailing economic cycle and monetary regime.
The empirical approach allows to test an articulated set of hypotheses: (i) the existence of significant intra-EU trade diversion effects in response to an external trade shock; (ii) the dependence of the intensity of the phenomenon on the degree of trade exposure between regions; (iii) the facilitating role of the sectoral substitutability of goods; (iv) the greater absorption capacity of regions in expansion phase of the cycle; (v) the modulation of effects according to the presence of monetary policy constraints (ZLB).
The expected results make a twofold contribution. From a theoretical point of view, the work extends the literature on the indirect effects of global shocks by demonstrating that the European interregional trade structure can act as a channel for transmission and absorption. On the policy side, empirical evidence can guide the definition of strategies for industrial resilience and territorial cohesion, suggesting the importance of policies aimed at supporting regions that can offset external demand with new internal opportunities.