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The Environmental Bias of Trade Policy

Joseph Shapiro ()

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper documents a new fact, then analyzes its causes and consequences: in most countries, import tariffs and non-tariff barriers are substantially lower on dirty than on clean industries, where an industry’s “dirtiness” is defined as its carbon dioxide (CO2) emissions per dollar of output. This difference in trade policy creates a global implicit subsidy to CO2 emissions in internationally traded goods and so contributes to climate change. This global implicit subsidy to CO2 emissions totals several hundred billion dollars annually. The greater protection of downstream industries, which are relatively clean, substantially accounts for this pattern. The downstream pattern can be explained by theories where industries lobby for low tariffs on their inputs but final consumers are poorly organized. A quantitative general equilibrium model suggests that if countries applied similar trade policies to clean and dirty goods, global CO2 emissions would decrease and global real income would change little

Keywords: Social and Behavioral Sciences; climate change; trade policy; trade and the environment (search for similar items in EconPapers)
Date: 2020-05-02
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-gen and nep-int
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