Trade, CO2, and the environment

This paper puts trades bene\u85ts and environmental costs on the same theoretical and empirical footing in order to provide a more complete measure of trades welfare e¤ects. The paper describes a model of trade and the environment, compiles new data on the CO2 emissions from shipping, and estimates key parameters using instrumental variables. Results show that international trades bene\u85ts exceed international trades environmen-tal costs by two orders of magnitude. While proposed regional or global carbon taxes on the CO2 emissions from transporting goods would increase global welfare and increase the implementing regions GDP, they would also harm poor countries