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Trade agreements, domestic environmental regulation, and transboundary pollution

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  • Lai, Yu-Bong
  • Hu, Chia-Hsien

Abstract

This paper investigates a second-best trade agreement between two countries that takes the distortion arising from their non-coordinated environmental policies into consideration. In a reciprocal-markets model with bidirectional transboundary pollution, we find that if the transboundary pollution is sufficiently strong, the second-best trade agreement requires that both countries subsidize the imported goods whose consumption gives rise to pollution. We also find that a bilateral tariff reduction is beneficial to the global environment.

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File URL: http://www.sciencedirect.com/science/article/B6VFJ-4P1P6SK-1/1/441a690500eba6ee54dc04b03c8b1be4
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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 2 (May)
Pages: 209-228

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Handle: RePEc:eee:resene:v:30:y:2008:i:2:p:209-228

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Web page: http://www.elsevier.com/locate/inca/505569

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References

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  1. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February.
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  4. Burguet, Roberto & Sempere, Jaume, 2003. "Trade liberalization, environmental policy, and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 25-37, July.
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  10. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506.
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  14. Copeland, Brian R., 2000. "Trade and environment: policy linkages," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 405-432, October.
  15. Abrego, Lisandro, et al, 2001. "Trade and Environment: Bargaining Outcomes from Linked Negotiations," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 414-28, August.
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  17. Ottar MÆstad, 1998. "On the Efficiency of Green Trade Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(1), pages 1-18, January.
  18. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, October.
  19. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
  20. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
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  22. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
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  24. Rodney D. Ludema & Ian Wooton, 1994. "Cross-Border Externalities and Trade Liberalization: The Strategic Control of Pollution," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 950-66, November.
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Citations

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Cited by:
  1. Tai-Liang Chen & Leonard Wang, 2010. "Trade liberalization and transboundary pollution in an international mixed duopoly," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 12(4), pages 187-200, December.
  2. Takeshi Iida & Kenji Takeuchi, 2010. "Policy-Induced Environmental Technology Transfer," Discussion Papers 1008, Graduate School of Economics, Kobe University.
  3. Morihiro Yomogida & Nori Tarui, 2013. "Emission Taxes and Border Tax Adjustments for Oligopolistic Industries," Working Papers 201317, University of Hawaii at Manoa, Department of Economics.
  4. Takao Asano & Noriaki Matsushima, 2012. "Environmental regulation and technology transfers," ISER Discussion Paper 0862, Institute of Social and Economic Research, Osaka University.
  5. CAVAGNAC Michel & PECHOUX Isabelle, 2007. "Domestic effects of environmental policies with transboundary pollution," LERNA Working Papers 07.07.228, LERNA, University of Toulouse.
  6. Takeshi Iida & Kenji Takeuchi, 2011. "Does free trade promote environmental technology transfer?," Journal of Economics, Springer, vol. 104(2), pages 159-190, October.

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