Environmental Economics and Policy Making in Developing Countries

Environmental Economics and Policy Making in Developing Countries

Current Issues

Edited by Ronaldo Seroa da Motta

The authors provide a comprehensive analysis of topics varying from the general problems of growth and conservation to specific applications such as; pollution costs, environmental taxation, deforestation and climate change. This volume also offers policymakers a comprehensive view of the challenges they face, and the legacies they leave, in order to convert environmental policy making into an actual programme of welfare improvement.

Chapter 2: The impact of perverse subsidies on international trade and the environment

Cees van Beers and Andre de Moor

Subjects: development studies, development economics, economics and finance, development economics, environmental economics, environment, environmental economics

Extract

Cees van Beers and André de Moor 2.1 INTRODUCTION The relationship between international trade and the natural environment has, until the end of the 1980s, received relatively little attention within both international and environmental economics. Most textbooks in both areas still do not pay much attention to this interface. For several years now there has been a great deal of research on the potential conflict between free trade and environmental regulation, on the impact of environmental regulation on international trade flows and the location choices of firms, and on the use of trade measures in environmental policy. Both international and environmental economists have contributed to this. There has been some debate on free trade versus protectionism, and the discussion in the institutional context has been, from the beginning, whether the greening of international trade agreements, notably the WTO, is useful and possible. What is accepted by most participants in the debates is that the classic theory of comparative advantage cannot be straightforwardly applied to situations in which significant environmental externalities exist.1 In this chapter it is argued that the discussion on the relationship between trade and environment is still incomplete. It appears that trade patterns are not only disturbed by incorrect prices as a result of market failures but also as a result of the policy failures of governments. Market failures mean that trade patterns are disturbed because prices do not incorporate environmental externalities caused by the production or consumption of commodities traded. Policy failures mean that trade...

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