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Trade sanctions and green trade liberalization

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  • NAGHAVI, ALIREZA

Abstract

This paper studies the impact of a World Trade Organization withdrawal of trade concessions against countries that fail to respect globally recognized environmental standards. We show that a punishing tariff can be effective when environmental and trade policies are endogenous. When required standards are not too stringent with respect to the marginal damage of pollution, compliance along with free trade as a reward is the unique equilibrium outcome. A positive optimal tariff in the case of non-compliance prevents complete relocation to pollution havens, but only works as a successful credible threat and does not emerge in equilibrium.

Suggested Citation

  • Naghavi, Alireza, 2010. "Trade sanctions and green trade liberalization," Environment and Development Economics, Cambridge University Press, vol. 15(4), pages 379-394, August.
    • Handle: RePEc:cup:endeec:v:15:y:2010:i:04:p:379-394_00
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    Cited by:

    1. Chen, Tai-Liang & Yang, Mingjie & Zou, Yuxiang, 2025. "Carbon emission control, tariff-carbon tax reform and intersectoral migration in the presence of international capital inflows," The North American Journal of Economics and Finance, Elsevier, vol. 78(C).
    2. Kendall Houghton & Helen Naughton, 2017. "Trade and sustainability: the impact of the International Tropical Timber Agreements on exports," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(6), pages 755-778, December.
    3. Noha Elboghdadly & Michael Finus, 2022. "Strategic climate policy with endogenous plant location: The role of border carbon adjustments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1266-1309, December.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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