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Trade disputes and the climate

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  • Haibara, Takumi

Abstract

Using a two-country perfectly competitive general equilibrium model, this paper identifies a mechanism through which trade restrictions and counter-restrictions affect the climate. The analysis shows that local pollution externalities and real income changes affect the climate impact of trade disputes. Specifically, a series of tariffs and retaliatory measures increases the level of global emissions if a country using export taxes (or production taxes) obtains considerable real income gains from local air pollution reductions. The self-interested incentive to reduce local pollution encourages retaliation and can be counterproductive to the climate.

Suggested Citation

  • Haibara, Takumi, 2024. "Trade disputes and the climate," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 732-741.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pa:p:732-741
    DOI: 10.1016/j.iref.2023.07.073
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    More about this item

    Keywords

    Tariffs; Retaliation; Second-best policies; Global pollution; Local air pollution;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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