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A Holistic View of Trade, Pollution Permits and Abatement

Author

Listed:
  • Hamid Beladi

    (University of Texas at San Antonio)

  • Lu Liu

    (Southwestern University of Finance and Economics, China)

  • Reza Oladi

    (Department of Applied Economics)

Abstract

By constructing a dynamic general equilibrium model this paper studies the optimal pollution emission and abatement policies for a small economy. We show that in autarky government issues an optimal level of emission permits but its optimal abatement level is zero at the unique steady- state equilibrium. On the other hand, government employs an optimal two-dimensional policy with free trade if the country is an exporter of a pollution intensive good. That is, government issues pollution permits (thus controls the emission level) while it undertakes a positive level of abatement activity. In other words, an optimal combination of emission cap and pollution abatement is required for a small trading economy with comparative advantage in dirty goods.

Suggested Citation

  • Hamid Beladi & Lu Liu & Reza Oladi, 2011. "A Holistic View of Trade, Pollution Permits and Abatement," Working Papers 0002, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0007eco
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    References listed on IDEAS

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    More about this item

    Keywords

    Pollution permits; abatement; international trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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