International trade and the environment: theoretical and policy linkages

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.N.B. Professor Neary was based at the Department of Economics, University College Dublin and CEPR Belfield, Dublin, Ireland when this article was first published. The full-text of this article is not available in ORA at this time. Citation: Neary, J. P. (2006). 'International trade and the environment: theoretical and policy linkages', Environmental and Resource Economics, 33(1), 95-118. [The original publication is available at www.springerlink.com]