Strategic Environmental Policy Under Free Trade with Transboundary Pollution
We analyze the effects of free trade on environmental policies in a strategic setting with transboundary pollution. Trade liberalization can result in a race to the bottom in environmental outcomes, making both countries worse off. With command and control policies (quotas), there is no race to the bottom. However, with internationally tradable permits, unless pollution is a pure global public bad, there is a race to the bottom in environmental policy. In our model carbon leakage alone, and not a terms of trade motive, drives countries to relax domestic environmental policy. Quantity-based tools strictly welfare-dominate price-based tools under free trade.
|Date of creation:||01 May 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ludema, R.D. & Wooton, I., 1992.
"Cross-Border Externalities and trade Liberalization: The Strategic Control of Pollution,"
UWO Department of Economics Working Papers
9202, University of Western Ontario, Department of Economics.
- Rodney D. Ludema & Ian Wooton, 1994. "Cross-Border Externalities and Trade Liberalization: The Strategic Control of Pollution," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 950-66, November.
- Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
- Kazuharu Kiyono & Masahiro Okuno-Fujiwara, 2003. "Domestic and international strategic interactions in environment policy formation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 613-633, 03.
- Kyle Bagwell & Robert W. Staiger, 1999.
"Domestic Policies, National Sovereignty and International Economic Institutions,"
NBER Working Papers
7293, National Bureau of Economic Research, Inc.
- Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
- Akihiko Yanase, 2007. "Dynamic Games of Environmental Policy in a Global Economy: Taxes versus Quotas," Review of International Economics, Wiley Blackwell, vol. 15(3), pages 592-611, 08.
- Rauscher, Michael, 2005. "International Trade, Foreign Investment, and the Environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 27, pages 1403-1456 Elsevier.
- Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
- Arja H. Turunen-Red & Alan D. Woodland, 2004. "Multilateral Reforms of Trade and Environmental Policy," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 321-336, 08.
- Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506, December.
When requesting a correction, please mention this item's handle: RePEc:isu:genres:12931. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Curtis Balmer)
If references are entirely missing, you can add them using this form.