Open AccessENVIRONMENTAL POLICY AND TRADE LIBERALIZATION: THE CASE OF TRANSBOUNDARY POLLUTION FROM CONSUMPTION
Author(s) -
FUJIWARA KENJI
Publication year - 2010
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/j.1939-7445.2010.00075.x
Subject(s) - environmental policy , consumption (sociology) , natural resource economics , pollution , liberalization , economics , free trade , international trade , business , environmental science , environmental protection , ecology , market economy , biology , social science , sociology
This paper develops a reciprocal market model of international duopoly with transboundary pollution from consumption to examine the effects of bilateral tariff reductions on the equilibrium pollution tax and welfare. I show that tariff reductions induce each country to raise an emission tax and that trade liberalization is welfare improving if the parameter of pollution damages is sufficiently large. These results are in contrast to the case of production‐generated pollution, and I seek the reason for this contrast.