Environmental Technology Transfer via Free Trade

This paper considers a model of international duopoly with global pollution to investigate the impact of tariff policy and licensing contracts on environmental technology transfer. Our main finding is that free trade is not always preferable. When the protection of intellectual property rights (IPR) is within a certain range, there is a possibility that the total world welfare is higher under a positive tariff rate than under a zero tariff rate. This implies that the protection of IPR being beyond the range is a prerequisite for the justification of free trade.Environmental technology transfer, Free trade, Tariff protection, Licensing