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Liberalizing Trade in Environmental Goods

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  • Bouwe R. Dijkstra
  • Anuj J. Mathew

Abstract

Trade liberalization in environmental goods is high on the agenda of the current Doha round. We examine its effects in a model with one domestic downstream polluting firm and two upstream firms (one domestic, one foreign). The domestic government sets the emission tax rate after the outcome of R&D is known. The upstream firms offer their technologies to the downstream firm at a flat fee. The effect of liberalization on the domestic upstream firm's R&D incentive is ambiguous. Liberalization usually results in cleaner production, which allows the country to reach higher welfare. However this increase in welfare is typically achieved at the expense of the environment (a backfire effect). Thus our results cast doubt on the hoped-for "win-win-win" outcome of trade liberalization in environmental goods.

Suggested Citation

  • Bouwe R. Dijkstra & Anuj J. Mathew, "undated". "Liberalizing Trade in Environmental Goods," Discussion Papers 10/05, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:10/05
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alain-Désiré Nimubona, 2010. "Pollution Policy and Liberalization of Trade in Environmental Goods," Working Papers 1004, University of Waterloo, Department of Economics, revised May 2010.
    2. Mona Haddad & Ben Shepherd, 2011. "Managing Openness : Trade and Outward-oriented Growth After the Crisis," World Bank Publications, The World Bank, number 2283, August.
    3. Nicole A. MATHYS & Jaime DE MELO, 2010. "Trade and Climate Change: The Challenges Ahead," Working Papers P14, FERDI.
    4. Natalia Zugravu-Soilita, 2017. "Trade in Environmental Goods: Empirical Exploration of Direct and Indirect Effects on Pollution by Country’s Trade Status," Working Papers 2017.56, Fondazione Eni Enrico Mattei.
    5. Wei, Wenjie, 2014. "Welfare and Environmental Effects of Subsidies and Tariffs in North-South Trade in Renewable Energy Equipment," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165887, Australian Agricultural and Resource Economics Society.

    More about this item

    Keywords

    Pollution abatement technology; R&D; trade and environment; trade liberalization; backfire effect;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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