Trade disputes and the climate

Takumi Haibara

International Review of Economics & Finance, 2024, vol. 89, issue PA, 732-741

Abstract: Using a two-country perfectly competitive general equilibrium model, this paper identifies a mechanism through which trade restrictions and counter-restrictions affect the climate. The analysis shows that local pollution externalities and real income changes affect the climate impact of trade disputes. Specifically, a series of tariffs and retaliatory measures increases the level of global emissions if a country using export taxes (or production taxes) obtains considerable real income gains from local air pollution reductions. The self-interested incentive to reduce local pollution encourages retaliation and can be counterproductive to the climate.

Keywords: Tariffs; Retaliation; Second-best policies; Global pollution; Local air pollution (search for similar items in EconPapers)
JEL-codes: F11 F18 H23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pa:p:732-741

DOI: 10.1016/j.iref.2023.07.073

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