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.
|Publisher||University of Aberdeen|
|Number of pages||17|
|Publication status||Published - 24 Jul 2019|
|Name||Discussion Papers in Economics and Finance|
|Publisher||University of Aberdeen Business School|
- International environmental agreements
- environmental taxation
- international trade
- Pareto efficiency
- Pareto improving reforms
- climate change
Montagna, C., Pinto, A., & Vlassis, N. (2019). Welfare and Trade Effects of International Environmental Agreements. (pp. 3-19). (Discussion Papers in Economics and Finance; Vol. 19, No. 4). University of Aberdeen.