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Can Cleaner Environment Promote International Trade? Environmental Policies as Export Promoting Mechanisms

Ioanna Pantelaiou (), Panos Hatzipanayotou (), Panagiotis Konstantinou () and Anastasios Xepapadeas
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Panos Hatzipanayotou: Athens University of Economics and Business
Panagiotis Konstantinou: AUEB

No 1810, DEOS Working Papers from Athens University of Economics and Business

Abstract: We develop an international duopoly model where the firms export their output to a world-market. Production uses a depletable resource, and it generates pollution which affects negatively households welfare. Governments control pollution using (i) an emission tax, the revenue from which finances public pollution abatement, (ii) a revenue-recycling tax, refunded to the emitting firm contingent on reducing the cost of private pollution abatement, and (iii) an environmentally related standard. We evaluate them as (i) export promoting Non-Tariff Measures (NTMs) measuers, and (ii) resource conserving/depleting and welfare enhancing policy instruments. Our results indicate that, by and large (i) public pollution abatement works as an export-promoting but resource depleting mechanism, which under certain conditions can enhance welfare; (ii) revenue recycling works as an export-contracting but resource preserving mechanism, and (iii) environmental standards relative to public abatement work as an export-contracting but resource preserving mechanism, but relative to revenue recycling work in the opposite direction.

Keywords: Emission taxation; Public Pollution Abatement; Recycling tax revenues; Environmental Related Standards; International Trade. (search for similar items in EconPapers)
JEL-codes: F18 H23 Q58 (search for similar items in EconPapers)
Date: 2018-02
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