Strategic Environmental Policy under Free Trade with Transboundary Pollution
AbstractWe analyze the effects of free trade on environmental policies in a strategic setting with transboundary pollution. Trade liberalization can result in a race to the bottom in environmental outcomes, making both countries worse off. With command and control policies (quotas), there is no race to the bottom. However, with internationally tradable permits, unless pollution is a pure global public bad, there is a race to the bottom in environmental policy. In our model carbon leakage alone, and not a terms of trade motive, drives countries to relax domestic environmental policy. Quantity-based tools strictly welfare-dominate price-based tools under free trade.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 15 (2011)
Issue (Month): 1 (02)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
Other versions of this item:
- Lapan, Harvey E. & Sikdar, Shiva, 2007. "Strategic Environmental Policy Under Free Trade with Transboundary Pollution," Staff General Research Papers 31298, Iowa State University, Department of Economics.
- Sikdar, Shiva & Lapan, Harvey E., 2008. "Strategic Environmental Policy Under Free Trade with Transboundary Pollution," Staff General Research Papers 12931, Iowa State University, Department of Economics.
- Lapan, Harvey E. & Sikdar, Shiva, 2010. "Strategic environmental policy under free trade with transboundary pollution," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59160, Australian Agricultural and Resource Economics Society.
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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