Trade, technology, and the environment: Does access to technology promote environmental regulation ?

Mary Lovely and David Popp

Chapter 10 in International Economic Integration and Domestic Performance, 2017, pp 169-188 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Focusing specifically on regulation of coal-fired power plants, we examine how technological innovation by early adopters influences the timing of new environmental regulation in non-innovating countries. We build a general equilibrium model of an open economy to identify the political-economy determinants of regulation. With a newly created dataset of SO2 and NOx regulations for coal-fired power plants and a patent-based measure of the technology frontier, we estimate the determinants of environmental regulation diffusion. Our findings support the hypothesis that international economic integration eases access to environmentally friendly technologies and leads to earlier adoption, ceteris paribus, of regulation in non-innovating countries. However, we also find evidence that domestic trade protection promotes earlier adoption allowing shifts of regulatory costs to domestic consumers. Furthermore, international market power permits large countries to shift costs to foreign consumers. Other political economy factors, such as the quality of domestic coal, are also important determinants.

Keywords: International Trade; Foreign Direct Investment; Environmental Standards; Labor Standards (search for similar items in EconPapers)
JEL-codes: F02 (search for similar items in EconPapers)
Date: 2017
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