Exports Competitiveness and Environmental Regulations

Ecological dumping refers a situation where governments choose less strict environmental standards. In consequence, dumping refers to producers obtaining hidden subsidies in the form of less strict pollution abatement requirements, this situation allows them to dump their products in international markets at prices that not reflect the true cost of production. In contrast to normal dumping, ecological dumping is an activity performed by governments, not by companies. In the European Union the principle of subsidiarity calls for national standards, whereas harmonization of national regulations calls for European standards. The common European objective was the assessment of the possibilities that governments might compete by undercutting each others’ environmental standards in a federal economy consisting of countries that differ in size and other characteristics. In the case of EU countries trade policy is banned, but the responsibility for environmental policies is common. European Union has created European Union's Emissions Trading System (EU ETS) which is the first large emissions trading scheme in the world.