Piecemeal Reform of Trade and Environmental Policy When Consumption Also Pollutes

Mark R. Metcalfe, John C. Beghin
February 1999  [99-WP 209]

The design of trade and environmental policy pays increasing attention to consumption-induced pollution linked to trade liberalization. The authors of this paper incorporate endogenous consumption pollution into a dual trade model to assess the welfare elects of coordinated trade and environmental piece-meal reform in a small, open and distorted economy They identify sufficient conditions for welfare-improving reforms of trade and environmental policies. They also discuss briefly the implications of using tradable permits instead of taxes.

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