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

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Author Info
Brian R. Copeland
M. Scott Taylor

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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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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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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
H4 - Public Economics - - Publicly Provided Goods

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 1998. "Is Free Trade Good for the Environment?," NBER Working Papers 6707, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. 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. [Downloadable!] (restricted)
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  3. David Card & John E. DiNardo, 2000. "Do Immigrant Inflows Lead to Native Outflows?," NBER Working Papers 7578, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
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  5. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. repec:cup:cbooks:9780521477185 is not listed on IDEAS
  12. 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. [Downloadable!] (restricted)
  13. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
  15. 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. [Downloadable!] (restricted)
  16. Grossman, Gene M., 1984. "The gains from international factor movements," Journal of International Economics, Elsevier, vol. 17(1-2), pages 73-83, August. [Downloadable!] (restricted)
  17. Michael Hoel, 1991. "Efficient International Agreements for Reducing Emissions of CO2," The Energy Journal, International Association for Energy Economics, vol. 12(2), pages 93-108.
  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. [Downloadable!] (restricted)
  19. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. McCarney, Geoff & Adamowicz, Vic, 2006. "The Effects of Trade Liberalization of the Environment: An Empirical Study," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25297, International Association of Agricultural Economists. [Downloadable!]
  2. ISHIKAWA Jota & OKUBO Toshihiro, 2009. "Greenhouse-Gas Emission Controls and International Carbon Leakage through Trade Liberalization," Discussion papers 09008, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
    Other versions:
  3. repec:bep:eapadv:v:4:y:2005:i:2:p:1408-1408 is not listed on IDEAS
  4. Francesco Crespi & Valeria Costantini, 2007. "Environmental Regulation and the Export Dynamics of Energy Technologies," Working Papers 2007.53, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  5. Alan S. Manne & Gunter Stephan, 2003. "Global Climate Change and the Equity-Efficiency Puzzle," Diskussionsschriften dp0306, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  6. Corrado Maria & Edwin Werf, 2008. "Carbon leakage revisited: unilateral climate policy with directed technical change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(2), pages 55-74, February. [Downloadable!] (restricted)
    Other versions:
  7. Dirk T.G. Rübbelke & Vivekananda Mukherjee & Tilak Sanyal, 2008. "Technology Transfer in the Non-traded Sector as a Means to Combat Global Warming," Working Papers 2008.78, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Partha Sen, 2008. "Fdeveloping Economies And The Environment - The Role Of Trade And Capital Flows," Working papers 172, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
  9. Wooders, M. & Zissimos, B., 2001. "The Efficiency, Equity and Politics of Emission Permit Trading," The Warwick Economics Research Paper Series (TWERPS) 586, University of Warwick, Department of Economics. [Downloadable!]
  10. Claudia Kemfert & Wietze Lise & Richard Tol, 2004. "Games of Climate Change with International Trade," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(2), pages 209-232, June. [Downloadable!] (restricted)
    Other versions:
  11. Pancoast, Rochelle & Gaisford, James, 2005. "Will the Kyoto Protocol Be Good for the Environment? Implications for Agriculture," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 06. [Downloadable!]
  12. Gunter Stephan & Georg Müller-Fürstenberger, 2003. "Does Distribution Matter? When Flexibility, Equity and Efficiency in Greenhouse Gas Abatement," Diskussionsschriften dp0301, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  13. Barrett, Scott & Stavins, Robert, 2002. "Increasing Participation and Compliance in International Climate Change Agreements," Working Paper Series rwp02-031, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
  14. Roberto Burguet & Jaume Sempere, 2007. "Trade of Permits for Greenhouse Gas Emissions; Bilateral Trade Need not Be the Answer," UFAE and IAE Working Papers 746.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  15. Georg Müller-Fürstenberg & Gunter Stephan, 2002. "Where-to-Abate' And 'Where-to-Invest' Flexibility - An Integrated Assessment Analysis of Climate Change," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(II), pages 191-213, June. [Downloadable!]
  16. Dirk T.G. Rübbelke & Vivekananda Mukherjee, 2006. "Global Climate Change, Technology Transfer and Trade with Complete Specialization," Working Papers 2006.114, Fondazione Eni Enrico Mattei. [Downloadable!]
  17. Thierry, BRECHET & Marc, GERMAIN & Philippe, MONFORT, 2003. "SpŽcialisation internationale et partage de la charge en matire de rŽduction de la pollution," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  18. Gunter Stephan & Georg Müller-Fürstenberger, 2004. "Does Distribution Matter? Efficiency, Equity and Flexibility in Greenhouse Gas Abatement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(1), pages 87-107, January. [Downloadable!] (restricted)
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