Trade, Emissions, and Environmental Spillovers: Issue linkages in Regional Trade Agreements∗

Clark Christopher Lundberg, Daniel Anthony Szmurlo and Ryan Michael Abman

No 10319, Policy Research Working Paper Series from The World Bank

Abstract: Reducing trade barriers offers tremendous potential for economic growth and productivity gains. However, higher incomes and increased industrial output can negatively impact the environment. This paper studies the impacts of trade liberalization on the emissions of ozone depleting substances regulated under the Montreal Protocol. While freer trade might challenge the gains achieved by the Montreal Protocol by increasing domestic use of ozone depleting substances, environmental provisions in regional trade agreements linked to Montreal Protocol participation might mitigate such negative environmental outcomes. The paper provides causal evidence that signing a new regional trade agreement leads to increases in consumption of ozone depleting substances relative to Montreal Protocol targets. Environmental provisions aimed at controlling ozone depleting substances offset the increase in consumption of ozone depleting substances observed in regional trade agreements without such provisions. The findings show that the effect is rooted in preventing a “reduction in overcompliance” with the Montreal Protocol observed in regional trade agreements without provisions. The findings also show that cumulative exposure to trade agreements, especially those with ozone depleting substances provisions, increases the speed at which countries ratify the Montreal Protocol amendments.

Date: 2023-02-27
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:10319

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