The design of trade and environmental policy pays increasing attention to consumption-induced pollution linked to trade liberalization. The authors of this paper incorporate endogenous consumption pollution into a dual trade model to assess the welfare elects of coordinated trade and environmental piece-meal reform in a small, open and distorted economy They identify sufficient conditions for welfare-improving reforms of trade and environmental policies. They also discuss briefly the implications of using tradable permits instead of taxes.
Metcalfe, Mark R. and Beghin, John C., "Piecemeal Reform of Trade and Environmental Policy When Consumption Also Pollutes" (1999). CARD Working Papers. 239.
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