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Dijkstra, Bouwe; Mathew, Anuj (2015)
Publisher: Springer Verlag
Languages: English
Types: Article
Subjects:
We examine the effects of trade liberalization in environmental goods in a model with one domestic downstream polluting firm and two upstream firms (one domestic, one foreign). The upstream firms offer their technologies to the downstream firm at a flat fee. The domestic government sets the emission tax rate after the outcome of R&D is known. The effect of liberalization on the domestic upstream firm's R&D incentive is ambiguous. Liberalization usually results in cleaner production, which allows the country to reach higher welfare. However this increase in welfare is typically achieved at the expense of the environment (a backfire effect).
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    • [1] Antweiler, W., B.R. Copeland and M.S. Taylor (2001), “Is free trade good for the environment?”, American Economic Review 91: 877-908.
    • [2] Biglaiser, G. and J.K. Horowitz (1995), “Pollution regulation and incentives for pollution-control research”, Journal of Economics and Management Strategy 3: 663-684.
    • [3] Binswanger, M. (2001),“Technological progress and sustainable development: what about the rebound e¤ect?”, Ecological Economics 36 : 119-132.
    • [4] Bréchet, T. and S. Ly (2013), “The many traps of green technology promotion”, Environmental Economics and Policy Studies 15: 73-91.
    • [22] Nimubona, A.-D. (2012), “Pollution policy and trade liberalization of environmental goods”, Environmental and Resource Economics 53: 323-346.
    • [34] World Trade Organization (2001), Ministerial Declaration, Ministerial Conference, Fourth Session, Doha, 9 - 14 November 2001.
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