Environmental Stringency And International Trade: A Look Across The Globe

Bojan Shimbov (), Inmaculada Martínez-Zarzoso () and Maite Alguacil ()
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Bojan Shimbov: University Jaume I, Institute of International Economics & Department of Economics
Inmaculada Martínez-Zarzoso: University Jaume I, Institute of International Economics & Department of Economics
Maite Alguacil: University Jaume I, Institute of International Economics & Department of Economics

No 9, Proceedings of the 5th International Conference "Economic and Business Trends Shaping the Future" 2024 from Faculty of Economics-Skopje, Ss Cyril and Methodius University in Skopje

Abstract: The main goal of this paper is to analyze the impact of carbon pricing, as a means to reducing carbon dioxide (CO2) emissions, on international trade in goods using a pane dataset of OECD and other developing countries with data over the period 2007 to 2018. We use Poisson pseudo-maximum likelihood regressions (PPML) with multi-dimensional fixed effects to estimate a gravity model of trade with panel data. To conduct our empirical analysis, we combine data on emissions from fuel combustion, which account for approximately 80 percent of global human-induced CO2 emissions and have been the main target of carbon pricing, with detailed international trade data using the HS 6-digit codes and information on the market-based policies applied by the countries over the sample period. Our findings confirm that, regardless of the environmental stringency variable used, pollution constraints have a significant impact on trade flows, with this effect being particularly pronounced in the most polluting industries.

Keywords: Environment and trade; Environmental policy; Pollution haven hypothesis; Gravity models; OECD (search for similar items in EconPapers)
JEL-codes: F18 H23 Q52 Q56 Q58 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-12-15
New Economics Papers: this item is included in nep-res
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