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Can Cleaner Environment Promote International Trade? Environmental Policies as Export Promoting Mechanisms

Author

Listed:
  • Ioanna Pantelaiou

    (Athens University of Economics and Business)

  • Panos Hatzipanayotou

    (Athens University of Economics and Business
    CESifo)

  • Panagiotis Konstantinou

    (Athens University of Economics and Business)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business
    University of Bologna)

Abstract

We examine whether environmental protection enhances international trade in a model of an international duopoly where production uses a depletable resource and generates cross-border pollution, and firms export their output to a world-market. Governments control pollution via either an emission tax, with revenue being used either to finance public pollution abatement or being refunded to the emitting firm contingent on reducing the cost of private pollution abatement (revenue-recycling), or an environmentally related standard. We evaluate these policies in terms of promoting exports, conserving the endowment of the natural resource, reducing pollution, and enhancing welfare. Our results indicate that in most cases, (1) revenue recycling is an export-contracting but resource preserving policy which also encourages firms’ pollution abatement activity, (2) public pollution abatement is an export-promoting but resource depleting policy. When the public sector is efficient in abating pollution, then overall pollution level across countries is lower compared to their level under tax-revenue recycling. Both policies entail ambiguous welfare effects. Environmental standards relative to public abatement is an export-contracting but resource preserving policy. Relative to revenue recycling work in the opposite way; they are always, however, welfare-enhancing.

Suggested Citation

  • Ioanna Pantelaiou & Panos Hatzipanayotou & Panagiotis Konstantinou & Anastasios Xepapadeas, 2020. "Can Cleaner Environment Promote International Trade? Environmental Policies as Export Promoting Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 809-833, April.
    • Handle: RePEc:kap:enreec:v:75:y:2020:i:4:d:10.1007_s10640-020-00408-1
    DOI: 10.1007/s10640-020-00408-1
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    Cited by:

    1. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2023. "Regulatory Stringency and Emission Leakage Mitigation," DEOS Working Papers 2302, Athens University of Economics and Business.
    2. Haddoud, Mohamed Yacine & Onjewu, Adah-Kole Emmanuel & Nowiński, Witold, 2021. "Environmental commitment and innovation as catalysts for export performance in family firms," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    3. A. Désiré Adom, 2021. "An Investigation into the Nexus Between Human Development and Carbon Dioxide Emissions: A Global Panel Analysis," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(4), pages 155-162, 12-2021.
    4. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.
    5. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.

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    More about this item

    Keywords

    Emission taxation; Public pollution abatement; Recycling tax revenues; Environmentally related standards; International trade;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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