Trade, Emissions, and Environmental Spillovers : Issue linkages in Regional Trade Agreements∗

Reducing trade barriers offers tremendous potential for economic growth and productivitygains. However, higher incomes and increased industrialoutput can negatively impact the environment. This paper studies the impacts of trade liberalization on the emissionsof ozone depleting substances regulated under the Montreal Protocol. While freer trade might challenge the gainsachieved by the Montreal Protocol by increasing domestic use of ozone depleting substances, environmental provisions inregional trade agreements linked to Montreal Protocol participation might mitigate such negative environmentaloutcomes. The paper provides causal evidence that signing a new regional trade agreement leads to increases inconsumption of ozone depleting substances relative to Montreal Protocol targets. Environmental provisions aimed atcontrolling ozone depleting substances offset the increase in consumption of ozone depleting substances observed inregional trade agreements without such provisions. The findings show that the effect is rooted in preventing a“reduction in overcompliance” with the Montreal Protocol observed in regional trade agreements without provisions.The findings also show that cumulative exposure to trade agreements, especially those with ozone depleting substancesprovisions, increases the speed at which countries ratify the Montreal Protocol amendments.