Welfare and Trade Effects of International Environmental Agreements

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Abstract

We analyse the welfare effects of environmental policy arising from the formation of an international environmental agreement on the participating and non-participating countries and thus shed light on the potential incentives for a country to join such an agreement. Within a N-country Q-goods general equilibrium framework under free-trade conditions, we consider unilateral and cooperative policy settings and, within the latter, country-specific and fully harmonized policies within the agreement. A key result in the paper is the emergence of a negative relationship, arising from terms of trade effects, between the welfare changes of the participating and non-participating countries following the formation of the agreement.
Original languageEnglish
PublisherUniversity of Aberdeen
Pages3-19
Number of pages17
Publication statusPublished - 24 Jul 2019

Publication series

NameDiscussion Papers in Economics and Finance
PublisherUniversity of Aberdeen Business School
No.4
Volume19
ISSN (Electronic)0143-4543

Keywords

  • International environmental agreements
  • environmental taxation
  • international trade
  • Pareto efficiency
  • Pareto improving reforms
  • climate change

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