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Trade and Commodity Taxes as Environmental Instruments in an Open Economy

Onur Koska (), Frank Stähler () and Onur Yeni ()

No 1704, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: In a simple reciprocal dumping model of trade, this study scrutinizes the strategic role of trade and commodity taxes as environmental instruments when consumption of an imported product generates pollution. The results suggest that both trade and commodity taxes have important implications on countries’ integration through trade. For sufficiently small values of the marginal disutility from pollution, the country claiming responsibility for pollution prefers commodity taxes over import tariffs, and compared to the case of trade policies, free trade can be maintained for larger values of the marginal disutility from pollution when commodity taxes are used strategically as environmental instruments.

Keywords: International trade; Consumption-generated pollution; Trade policy; Commodity taxes (search for similar items in EconPapers)
JEL-codes: F12 F18 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2017-05, Revised 2017-05
New Economics Papers: this item is included in nep-env and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:1704

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