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Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol

Listed author(s):
  • Brian R. Copeland
  • M. Scott Taylor

This paper demonstrates how three important results in environmental economics, true under mild conditions in closed economies, are false or need serious amendment in a world with international trade in goods. Since the three results we highlight have framed much of the ongoing discussion and research on the Kyoto protocol our viewpoint from trade theory suggests a re-examination may be in order. Specifically, we demonstrate that in an open trading world, but not in a closed economy setting: (1) unilateral emission reductions by the rich North can create self-interested emission reductions by the unconstrained poor South; (2) simple rules for allocating emission reductions across countries (such as uniform reductions) may well be efficient even if international trade in emission permits is not allowed; and (3) when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions.

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File URL: http://www.nber.org/papers/w7657.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7657.

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Date of creation: Apr 2000
Publication status: published as Copeland, Brian R. and M. Scott Taylor. "Free Trade And Global Warming: A Trade Theory View Of The Kyoto Protocol," Journal of Environmental Economics and Management, 2005, v49(2,Mar), 205-234.
Handle: RePEc:nbr:nberwo:7657
Note: ITI PE EEE
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