Greening Trade Agreements Through Harmonization of Environmental Regulations

Yasushi Kawabata and Yasuhiro Takarada ()
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Yasuhiro Takarada: Nanzan University

Environmental & Resource Economics, 2023, vol. 86, issue 1, No 3, 57-81

Abstract: Abstract Countries are increasingly using free trade agreements (FTAs) and customs unions (CUs) to cooperate on environmental issues by including environmental provisions in regional trade agreements (RTAs). We examine whether countries form RTAs with regional environmental regulations and join a multilateral trade agreement (MTA) with a common environmental regulation that maximizes world welfare. Each government imposes an environmental tax to mitigate negative externalities caused by the consumption of differentiated goods. The main finding is that a deep FTA with regional harmonization of environmental taxes may act as a stumbling block for an MTA with multilateral harmonization of environmental taxes if the degree of product differentiation is intermediate. In contrast, a deep CU with a regional environmental tax serves as a building block, even if negative consumption externalities are transboundary.

Keywords: Customs union; Free trade agreement; Multilateral trade agreement; Environmental taxes; Tariffs (search for similar items in EconPapers)
JEL-codes: F12 F13 F18 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10640-023-00787-1

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