Abstract
I review and extend three approaches to trade and environmental policies: competitive general equilibrium, oligopoly and monopolistic competition. The first two have surprisingly similar implications: deviations from first-best rules are justified only by constraints on policy choice (which motivates what I call a “single dividend” approach to environmental policy), and taxes and emissions standards differ in ways which reflect the Le Chatelier principle. I also show how environmental taxes may lead to a catastrophic relocation of industry in the presence of agglomeration effects, although not necessarily if there is a continuum of industries which differ in pollution intensity.
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*An earlier version was presented as an invited plenary lecture to the European Association for Environmental and Resource Economics Conference, Oslo, 1999.
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Neary, J.P. International Trade and the Environment: Theoretical and Policy Linkages. Environ Resource Econ 33, 95–118 (2006). https://doi.org/10.1007/s10640-005-1707-4
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DOI: https://doi.org/10.1007/s10640-005-1707-4
Key words
- environmental policy
- international trade policy
- location and economic geography
- pollution abatement
- strategic trade policy