Trade policies for low‐carbon development in developing countries: Insights from Kenya

ABSTRACT Motivation Greenhouse gas emissions from the transport, energy, and industrial sectors are rising in Kenya, with projections indicating that energy production and consumption will be the leading sources of emissions by 2030. Purpose This study aims to examine the potential role of energy‐efficiency‐improving low‐carbon technologies in transitioning the economy towards low‐carbon development. Approach and methods It assesses the increased supply of energy‐efficiency‐improving machinery as an intermediate input to reduce energy consumption to the macroeconomy and environment in domestic and international financing scenarios using a computable general equilibrium model for Kenya. Findings Overall, increasing energy efficiency and improving machinery and equipment under the two financing options has a positive impact on gross domestic product, exports, imports, domestic production, and household consumption. The economic and environmental effects of financing through international support are more pronounced compared to those of financing through domestic resources. Policy implications The results of the study imply that developing countries such as Kenya can consider and explore different trade policies and instruments to support their path to low‐carbon development. This could include reducing or removing tariffs on low‐carbon technology machinery. Advanced world economies, for their part, could finance the supply of low‐carbon technologies by making these available at lower cost.