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Piecemeal Reform of Trade and Environmental Policy When Consumption Also Pollutes

Author

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  • Metcalfe, Mark R.
  • Beghin, John C.

Abstract

The design of trade and environmental policy pays increasing attention to pollution linked to trade liberalization and generated by consumption. We incorporate endogenous (price-responsive) consumption pollution into a dual trade model to assess welfare effects of coordinated trade and environmental piecemeal reform in a small, open and distorted economy. Pollution is generated by production and consumption. Producers control the level of pollution and face incentives to abate both types of pollution. We identify sufficient conditions for welfare-improving reforms of trade and environmental policies. An additional domestic environmental policy instrument must be imposed on exportables because of their supply response to foreign environmental taxes.

Suggested Citation

  • Metcalfe, Mark R. & Beghin, John C., 1999. "Piecemeal Reform of Trade and Environmental Policy When Consumption Also Pollutes," Hebrew University of Jerusalem Archive 18362, Hebrew University of Jerusalem.
    • Handle: RePEc:ags:hebarc:18362
    DOI: 10.22004/ag.econ.18362
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    References listed on IDEAS

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    1. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September.
    2. Carlo Perroni & Randall M. Wigle, 1994. "International Trade and Environmental Quality: How Important Are the Linkages?," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 551-567, August.
    3. James R. MARKUSEN, 2021. "International Externalities And Optimal Tax Structures," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 16, pages 341-355, World Scientific Publishing Co. Pte. Ltd..
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