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Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol

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  • Brian R. Copeland
  • M. Scott Taylor

Abstract

This paper demonstrates how three important results in environmental economics, true under mild conditions in closed economies, are false or need serious amendment in a world with international trade in goods. Since the three results we highlight have framed much of the ongoing discussion and research on the Kyoto protocol our viewpoint from trade theory suggests a re-examination may be in order. Specifically, we demonstrate that in an open trading world, but not in a closed economy setting: (1) unilateral emission reductions by the rich North can create self-interested emission reductions by the unconstrained poor South; (2) simple rules for allocating emission reductions across countries (such as uniform reductions) may well be efficient even if international trade in emission permits is not allowed; and (3) when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7657.

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Date of creation: Apr 2000
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Handle: RePEc:nbr:nberwo:7657

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  1. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  2. David Card & John E. DiNardo, 2000. "Do Immigrant Inflows Lead to Native Outflows?," NBER Working Papers 7578, National Bureau of Economic Research, Inc.
  3. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
  4. McKibbin, Warwick J. & Shackleton, Robert & Wilcoxen, Peter J., 1999. "What to expect from an international system of tradable permits for carbon emissions," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 319-346, August.
  5. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
  6. Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Reducing US carbon emissions: an econometric general equilibrium assessment," Resource and Energy Economics, Elsevier, vol. 15(1), pages 7-25, March.
  7. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.
  8. Welsch, Heinz, 1995. "Incentives for forty-five countries to join various forms of carbon reduction agreements," Resource and Energy Economics, Elsevier, vol. 17(3), pages 213-237, November.
  9. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  10. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
  11. Michael Hoel, 1991. "Efficient International Agreements for Reducing Emissions of CO2," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 93-108.
  12. Brecher, Richard A & Choudhri, Ehsan U, 1982. "Immiserizing Investment from Abroad: The Singer-Prebisch Thesis Reconsidered," The Quarterly Journal of Economics, MIT Press, vol. 97(1), pages 181-90, February.
  13. Copeland, B.R. & Taylor, M.S., 1993. "Trade and Transboundary Pollution," UBC Departmental Archives 93-46, UBC Department of Economics.
  14. Chander, Parkash & Tulkens, Henry, 1992. "Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems," European Economic Review, Elsevier, vol. 36(2-3), pages 388-399, April.
  15. Gordon H. Hanson & Matthew J. Slaughter, 1999. "The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States," NBER Working Papers 7074, National Bureau of Economic Research, Inc.
  16. Markusen, James R. & Melvin, James R., 1979. "Tariffs, capital mobility, and foreign ownership," Journal of International Economics, Elsevier, vol. 9(3), pages 395-409, August.
  17. Grossman, Gene M., 1984. "The gains from international factor movements," Journal of International Economics, Elsevier, vol. 17(1-2), pages 73-83, August.
  18. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
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