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Clean development mechanism in North-South trade


  • Chu Ping Lo


Purpose - There is great conflict between some developed countries and developing countries regarding attitudes toward reducing global warming (e.g. the USA vs China). The aim of this paper is to argue that open trade doesn't necessarily increase world pollution if clean development mechanism (CDM) is generously undertaken and if the CDM devotes considerable real resources in transfers of the associate abatement technology. Design/methodology/approach - The impacts of trade on environment can be decomposed into scale, technique and composition effects. This paper incorporates abatement assets into Copeland and Taylor's model to argue that the technique effect stems from an increasing in pollution taxes and in international diffusion of abatement technology; however, the former is fully offset but the latter is facilitated by the CDM. Findings - While world pollution is jointly determined by the composition and technique effects, in contrast to literature, open trade doesn't necessarily increase world pollution if CDM is generously undertaken with considerable real resources in abatement technology transfers. Originality/value - Currently, there are more than about one half of the CDM projects that allocate no real resources in technology transfers. This study addresses how voluntary investment of the CDM from the North (e.g. the USA) to the South (e.g. China) might reduce pollution on a global level only if having “generously” technology transfer.

Suggested Citation

  • Chu Ping Lo, 2012. "Clean development mechanism in North-South trade," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(4), pages 485-498, November.
  • Handle: RePEc:eme:caerpp:v:4:y:2012:i:4:p:485-498

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    References listed on IDEAS

    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
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    7. Whalley, John & Xin, Xian, 2009. "Home and regional biases and border effects in Armington type models," Economic Modelling, Elsevier, vol. 26(2), pages 309-319, March.
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    9. Zhang, Wei, 2001. "Rethinking Regional Disparity in China," Economic Change and Restructuring, Springer, vol. 34(1-2), pages 113-138.
    10. Mika Saito, 2004. "Armington elasticities in intermediate inputs trade: a problem in using multilateral trade data," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1097-1117, November.
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    Cited by:

    1. Abd Rashid, Rusila Zamani & Mohd. Salleh, Hamzah & Ani, Mohd Hanafi & Yunus, Nurul Azhani & Akiyama, Tomohiro & Purwanto, Hadi, 2014. "Reduction of low grade iron ore pellet using palm kernel shell," Renewable Energy, Elsevier, vol. 63(C), pages 617-623.


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