A Holistic View of Trade, Pollution Permits and Abatement
AbstractBy constructing a dynamic general equilibrium model this paper studies the optimal pollution emission and abatement policies for a small economy. We show that in autarky government issues an optimal level of emission permits but its optimal abatement level is zero at the unique steady- state equilibrium. On the other hand, government employs an optimal two-dimensional policy with free trade if the country is an exporter of a pollution intensive good. That is, government issues pollution permits (thus controls the emission level) while it undertakes a positive level of abatement activity. In other words, an optimal combination of emission cap and pollution abatement is required for a small trading economy with comparative advantage in dirty goods.
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Bibliographic InfoPaper provided by College of Business, University of Texas at San Antonio in its series Working Papers with number 0002.
Length: 23 pages
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Pollution permits; abatement; international trade;
Find related papers by JEL classification:
- F1 - International Economics - - Trade
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
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