World Trade and the Environment: Issues and Policies

Abstract

This paper provides an overview of trade, environmental, and related public issues and policies. It discusses the pollution problem, the recent global warming trend, the attempts of world's various levels of institutions such as the UN, the WTO, regional, national, and other organizations to solve the global trade and environmental issues. It also discusses a number of basic theoretical issues and empirical findings such as the free-rider problem, tragedy of the commons, theory of second best, relative efficacy of price and quantity control, carbon leakage, border carbon adjustments, cap-and-trade system, pollution haven hypothesis, optimal social discount rate and the environmental Kuznets curve. Some computable general equilibrium models are reviewed and several notable WTO environmental and health-related trade dispute cases are analyzed, including the tuna-dolphin, shrimp-turtle, eco-labeling, beef-hormone, and GMOs cases.

Keywords: Trade and environment, Kyoto Protocol, cap and trade, ETS, social discount rate, pollution haven hypothesis, EKC, computable environmental GE models, WTO trade dispute cases

JEL Classification: F18, F53, F55, K33, N5, Q5, Q54, Q56