Welfare and Trade Effects of International Environmental Agreements

Catia Montagna, Avanti Pinto, Nikolaos Vlassis

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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 of 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. These however do not result in a zero sum welfare outcome for the world as a whole.
Original languageEnglish
Pages (from-to)331-345
Number of pages15
JournalEnvironmental and Resource Economics
Volume76
Issue number2-3
DOIs
Publication statusPublished - 7 Jun 2020

Bibliographical note

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Keywords

  • International Environmental Agreements
  • Environmental taxation
  • Climate Change
  • Trade
  • Pareto improving reforms
  • Pareto efficiency
  • Climate change
  • International environmental agreements
  • International trade

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  • Cite this

    Montagna, C., Pinto, A., & Vlassis, N. (2020). Welfare and Trade Effects of International Environmental Agreements. Environmental and Resource Economics, 76(2-3), 331-345. https://doi.org/10.1007/s10640-020-00428-x