The effects of environmental provisions in RTAs on PM2.5 air pollution

Li Zhou, Xi Tian and Zhengyi Zhou

Applied Economics, 2017, vol. 49, issue 27, 2630-2641

Abstract: This article examines the effect of regional trade agreements (RTAs) with and without environmental provisions on the concentration of PM2.5 (fine particulate matter $$ \le 2.5\,{\rm{\mu m}}$$≤2.5μm in diameter), which is one of the most significant air pollutants. Using panel data for 136 countries from 2001 to 2010, we estimate the effect of trade liberalization under RTAs and the effect of environmental regulations under RTAs with environmental provisions. Moreover, paired countries are used to examine the effect of RTAs with environmental provisions on the convergence of PM2.5 concentrations. Human behaviours and natural characteristics are added as control variables, and the potential endogeneity and environmental provisions of RTAs as well as the gross domestic product and openness of specific regions are addressed using instrumental variables or difference-in-differences after propensity score matching. The main results indicate that RTAs without environmental provision terms lead to worse air quality in terms of PM2.5 concentrations, whereas RTAs with environmental provision terms are likely to be associated with a lower level of PM2.5 concentrations. In addition, RTAs with environmental provisions, especially environmental cooperation provisions, facilitate the convergence of PM2.5 concentrations between contracting countries, which can be explained by the late-mover advantage after distinguishing North–South, South–South and North–North trade forms.

Date: 2017
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DOI: 10.1080/00036846.2016.1243218

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