Can trade be good for the environment?
Harvey Lapan and
Shiva Sikdar
ISU General Staff Papers from Iowa State University, Department of Economics
Abstract:
We analyze the impact of trade in a differentiated good on environmental policy when there is local and transboundary pollution. In autarky, the (equivalent) pollution tax is set equal to the marginal damage from own emissions. If the strategic policy instrument is a tax, leakage occurs under trade and tends to lower the tax. The net terms of trade effect, due to the exportable and importable varieties of the differentiated good, tends to increase the tax. We derive conditions under which pollution taxes under trade are higher than the marginal damage from own emissions, i.e., higher than the Pigouvian tax and than that under autarky. Then, pollution falls under trade relative to autarky. When countries use quotas/permits to regulate pollution, there is no leakage, while the net terms of trade effect tends to make pollution policy stricter. The equivalent tax is always higher than the marginal damage from own emissions, i.e., always higher than the Pigouvian tax and than that under autarky; hence, pollution always falls under trade. Our analysis provides some insight into the findings in the empirical literature that trade might be good for the environment.
Date: 2014-10-01
References: Add references at CitEc
Citations:
Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... a0952eedeb59/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden
Related works:
Journal Article: Can Trade Be Good for the Environment? (2017) 
Working Paper: Can Trade Be Good for the Environment? (2016) 
Working Paper: Can Trade be good for the environment? (2014) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:201410010700001012
Access Statistics for this paper
More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().