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Environmental policy in the European Union: Fostering the development of pollution havens?

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  • Cave, Lisa A.
  • Blomquist, Glenn C.

Abstract

A pollution haven occurs when dirty industries from developed nations relocate to developing nations in order to avoid strict environmental standards or developed nations imports of dirty industries expand replacing domestic production. The purpose of this study is to determine whether the European Union (EU) has increased its imports of "dirty" goods from poorer, less democratic countries during a period of more stringent environmental standards. Previous empirical studies such as those by Levinson and Taylor [Levinson, A., and Taylor, M.S., in press. Unmasking the Pollution Haven Effect. International Economic Review.], Ederington, Levinson and Minier [Ederington, J., Levinson, A., and Minier, J., 2005. Footloose and Pollution-Free. Review of Economics and Statistics., 87: 92-99.], Kahn and Yoshino (2004), and Ederington and Minier [Ederington, J., and Minier. J., 2003. Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis. Canadian Journal of Economics., 36: 137-54.] find evidence that United States imports are responsive to changes in environmental stringency, but the effects of EU policy have not been examined as thoroughly. Our study follows Kahn [Kahn, M.E., 2003. The Geography of Us Pollution Intensive Trade: Evidence from 1958 to 1994. Regional Science and Urban Economics., 33: 383-400.] and examines the impact of industry energy intensity and toxicity, measured by an energy index and a Toxic Release Inventory (TRI) index, on imports into the EU, at the 2-digit industry level from 1970 to 1999. We use the signing of the Maastricht Treaty to signify a period of more uniform and stringent community wide environmental standards (1993-1999), and identify the level of per capita GDP within an EU trading partner. We find an increased amount of EU energy intensive trade with poorer countries during the period with more stringent EU environmental standards. This result is not robust, however, when poorer countries are defined by OECD membership and geographic region. We do not find an increased amount of EU toxic intensive trade with poorer countries although there is some evidence of increased EU imports of toxic goods from poorer OECD and non-EU European countries. For our full sample of trading partners in all regions, the evidence supports the PHH for EU energy intensive trade, but not for toxic intensive trade. Results for regional trade analysis are less clear.

Suggested Citation

  • Cave, Lisa A. & Blomquist, Glenn C., 2008. "Environmental policy in the European Union: Fostering the development of pollution havens?," Ecological Economics, Elsevier, vol. 65(2), pages 253-261, April.
  • Handle: RePEc:eee:ecolec:v:65:y:2008:i:2:p:253-261
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    References listed on IDEAS

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    Cited by:

    1. Oberndorfer, Ulrich, 2008. "EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry," ZEW Discussion Papers 08-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. repec:eee:jeeman:v:85:y:2017:i:c:p:171-192 is not listed on IDEAS
    3. Mesagan, Ekundayo, 2015. "Economic Growth and Environment Nexus: The Role of Foreign Direct Investment," MPRA Paper 76722, University Library of Munich, Germany.
    4. Andrea M. Leiter & Arno Parolini & Hannes Winner, 2009. "Environmental Regulation and Investment: Evidence from European Industries," Working Papers 2009-04, Faculty of Economics and Statistics, University of Innsbruck.
    5. Predrag Rajsic & Glenn Fox, 2016. "Environmental Externalities, Comparative Advantage, and the Location of Production: An Application to the Canadian Dairy Industry," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 311-337, June.
    6. Cadarso, María-Ángeles & López, Luis-Antonio & Gómez, Nuria & Tobarra, María-Ángeles, 2012. "International trade and shared environmental responsibility by sector. An application to the Spanish economy," Ecological Economics, Elsevier, vol. 83(C), pages 221-235.
    7. Kaltenegger, Oliver & Löschel, Andreas & Baikowski, Martin & Lingens, Jörg, 2017. "Energy costs in Germany and Europe: An assessment based on a (total real unit) energy cost accounting framework," Energy Policy, Elsevier, vol. 104(C), pages 419-430.
    8. Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
    9. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2011. "Environmental regulation and investment: Evidence from European industry data," Ecological Economics, Elsevier, vol. 70(4), pages 759-770, February.
    10. Francesco Crespi & Claudia Ghisetti & Francesco Quatraro, 2015. "Environmental and innovation policies for the evolution of green technologies: a survey and a test," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 343-370, December.
    11. Honma, Satoshi & Yoshida, Yushi, 2014. "An Account of Pollution Emission Embodied in Global Trade: PGT1 and PGT2 Database," MPRA Paper 57489, University Library of Munich, Germany.
    12. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2010. "Environmental Regulation and Investment: Evidence from European Country-Industry Data," Working Papers in Economics 2010-1, University of Salzburg, revised 13 Jan 2010.
    13. Candau, Fabien & Dienesch, Elisa, 2017. "Pollution Haven and Corruption Paradise," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 171-192.
    14. Kaika, Dimitra & Zervas, Efthimios, 2013. "The Environmental Kuznets Curve (EKC) theory—Part A: Concept, causes and the CO2 emissions case," Energy Policy, Elsevier, vol. 62(C), pages 1392-1402.
    15. Satoshi Honma & Yushi Yoshida, 2012. "An Empirical Investigation of the Balance of Embodied Emission in Trade:Industry Structure and Emission Abatement," Discussion Papers 57, Kyushu Sangyo University, Faculty of Economics.
    16. repec:kap:enreec:v:68:y:2017:i:3:d:10.1007_s10640-016-0035-1 is not listed on IDEAS
    17. Yang Lu, 2010. "Do environmental regulations influence the competitiveness of pollution-intensive products?," Frontiers of Economics in China, Springer;Higher Education Press, vol. 5(2), pages 276-298, June.
    18. Anne MUSSON, 2012. "The importance of the stakeholders’ involvement in building indicators. The case of environmental regulation in France," Working Papers 2011-2012_8, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Apr 2014.
    19. Court, Christa D. & Munday, Max & Roberts, Annette & Turner, Karen, 2015. "Can hazardous waste supply chain ‘hotspots’ be identified using an input–output framework?," European Journal of Operational Research, Elsevier, vol. 241(1), pages 177-187.
    20. Matutinović, Igor & Salthe, Stanley N. & Ulanowicz, Robert E., 2016. "The mature stage of capitalist development: Models, signs and policy implications," Structural Change and Economic Dynamics, Elsevier, vol. 39(C), pages 17-30.
    21. Yushi Yoshida & Satoshi Honma, 2011. "Did International Trade Become Dirtier in Developing Countries? On the Composition Effect of International Trade on the Environment," Discussion Papers 52, Kyushu Sangyo University, Faculty of Economics.

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