International Trade and Green Growth

This paper reviews the challenges and
opportunities raised by international trade for developing
countries considering a green growth strategy. A key concern
is the effect of environmental policies on international
competitiveness. For production-generated pollution, there
is evidence that stringent environmental policy reduces some
indicators of competitiveness, but the effect is small in
most sectors. However, tightening up environmental standards
is unlikely to reduce international competitiveness when
pollution is generated by consumption. And where depletion
of natural capital is a threat, effective environmental
policy is an important component of a policy aimed at
developing long-run international competitiveness. The
effects of trade on environmental policy, the interaction
between trade and technology transfer, and the interaction
between trade and transboundary environmental problems are
also reviewed. An emerging issue is the potential use of
border taxes to curtail carbon leakage. The paper discusses
some of the possible responses by developing countries. Some
work has indicated that export taxes or voluntary export
restraints applied to carbon-intensive production in
non-coalition countries may be preferable to a carbon tariff
regime. The paper concludes by suggesting some topics for
further research.