EconPapers    
Economics at your fingertips  
 

Environmental Policy Instrument Choice and International Trade

J Holladay (), Mohammed Mohsin () and Shreekar Pradhan
Additional contact information
Mohammed Mohsin: University of Tennessee

Environmental & Resource Economics, 2019, vol. 74, issue 4, No 6, 1585-1617

Abstract: Abstract We develop a dynamic stochastic general equilibrium model to understand how environmental policy instrument choice affects trade. We extend the existing literature by employing an open economy model to evaluate three environmental policy instruments: cap-and-trade, pollution taxes, and an emissions intensity standard in the face of two types of exogenous shocks. We calibrate the model to Canadian data and simulate productivity and import price shocks. We evaluate the evolution of key macroeconomic variables, including the trade balance in response to the shocks under each policy instrument. Our findings for the evolution of output and emissions under a productivity shock are consistent with previous closed economy models. Our open economy framework allows us to find that a cap-and-trade policy dampens the international trade effects of the business cycle relative to an emissions tax or intensity standard. Under an import shock, pollution taxes and intensity targets are as effective as cap-and-trade policies in reducing variance in consumption and employment. The cap-and-trade policy limits the intensity of the import competition shock suggesting that particular policy instrument might serve as a barrier to trade.

Keywords: Environmental policy; Import competition; Business cycles; Macroeconomic dynamics; Open economy (search for similar items in EconPapers)
JEL-codes: E32 Q54 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10640-019-00381-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Environmental Policy Instrument Choice and International Trade (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:74:y:2019:i:4:d:10.1007_s10640-019-00381-4

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-019-00381-4

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2024-04-28
Handle: RePEc:kap:enreec:v:74:y:2019:i:4:d:10.1007_s10640-019-00381-4