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Trade and Commodity Taxes as Environmental Instruments in an Open Economy

Author

Listed:
  • Onur A. Koska

    (Department of Economics, Middle East Technical University, Ankara, Turkey)

  • Frank Stähler

    (Department of Economics, University of Tübingen, Tübingen, Germany; Department of Economics, University of Adelaide, Adelaide, Australia; Center for Economic Studies, The Ifo Institute (CESifo), Munich, Germany)

  • Onur Yeni

    (Department of Economics, Hacettepe University, Ankara, Turkey)

Abstract

In a simple reciprocal dumping model of trade, this study scrutinizes the strategic role of trade and commodity taxes as environmental instruments when consumption of an imported product generates pollution. The results suggest that both trade and commodity taxes have important implications on countries’ integration through trade. For sufficiently small values of the marginal disutility from pollution, the country claiming responsibility for pollution prefers commodity taxes over import tariffs, and compared to the case of trade policies, free trade can be maintained for larger values of the marginal disutility from pollution when commodity taxes are used strategically as environmental instruments.

Suggested Citation

  • Onur A. Koska & Frank Stähler & Onur Yeni, 2017. "Trade and Commodity Taxes as Environmental Instruments in an Open Economy," ERC Working Papers 1704, ERC - Economic Research Center, Middle East Technical University, revised May 2017.
    • Handle: RePEc:met:wpaper:1704
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    International trade; Consumption-generated pollution; Trade policy; Commodity taxes;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment

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