DR-CAFTA and the environment

The Dominican Republic-Central American Free Trade Agreement with the United States aims to create a free trade zone for economic development. The Agreement is expected to intensify commerce and investment among the participating countries. This paper analyzes the changes in the production and trading patterns in 2-digit manufacturing sectors with the goal of understanding the short-term environmental implications of the Dominican Republic-Central American Free Trade Agreement. More specifically, the paper addresses the questions: Did pollution increase in the period after the Agreement negotiations? Did trade and production shift toward pollution intensive factors? The results suggest an increase in pollution emissions in the post-negotiations period. The increase in emissions is mainly attributable to scale effects. Composition effects are small and in some cases (including Nicaragua and Honduras) favoring cleaner industries and partially compensating the pollution gains from output and export growth.Environmental Economics&Policies,Water and Industry,Emerging Markets,Economic Theory&Research,Brown Issues and Health

Trade liberalization and the environment in Vietnam

Vietnam's integration with the international economy has increased significantly over the past decade, aided by substantial liberalization of trade, and appears set to increase further as trade-expanding measures take full effect. This dramatic shift in Vietnam's trading patterns has important implications for the environment and use of natural resources. This paper offers a systematic analysis of the trading and investment patterns to give a broader understanding of the environmental implications of greater openness of the economy during the past decade. The results suggest increasing manufacturing and export activity in water and toxic pollution-intensive sectors compared with the less pollution-intensive sectors. The story is, on the surface, consistent with the changing composition of Vietnamese production and exports away from traditional sectors and toward pollution-intensive manufacturing (especially leather and textiles). The paper also highlights the need to consider strengthening environmental policies while further trade liberalization is being contemplated through Vietnam's joining of the World Trade Organization.Environmental Economics&Policies,Water and Industry,Economic Theory&Research,Free Trade,Green Issues

Does environmental regulation matter? Determinants of the location of new manufacturing plants in India in 1994

The cost of complying with environmental regulations has been cited as a major burden on businesses. Is it enough of a burden to influence where businesses locate new plants, which are not restricted to their choice of location? The authors examine a unique establishment level dataset to find out whether the stringency of environmental regulation affects where firms locate new plants. Using a conditional logit model, they estimate the importance of difference variables in plant location choice. After controlling for the impact of factor price differentials, infrastructure and agglomeration, they find that the number of new plans commissioned in different states of India in 1994 does not appear to be adversely affected by more stringent environmental enforcement at the state level. In other words, and environmental"race to the bottom"is unlikely. They find that the level of existing business activity overwhelms all other factors affecting location decision. Reliable infrastructure and factors of production are also critical.Environmental Economics&Policies,Public Sector Economics&Finance,Economic Theory&Research,Labor Policies,Decentralization,Environmental Economics&Policies,National Governance,Economic Theory&Research,Health Economics&Finance,Public Sector Economics&Finance

Industrial pollution in economic development: Kuznets revisited

Using new international data, the authors test for an inverse U-shaped, or"Kuznets,"relationship between industrial water pollution and economic development. They measure the effect of income growth on three proximate determinants of pollution: the share of manufacturing in total output, the sectoral composition of manufacturing, and the intensity (per unit of output) of industrial pollution at the"end of pipe."They find that the manufacturing share of output follows a Kuznets-type trajectory, but the other two determinants do not. Sectoral composition gets"cleaner"through middle-income status and then stabilizes. At the end of the pipe, pollution intensity declines strongly with income. The authors attribute this partly to stricter regulation as income increases and partly to pollution-labor complementarity in production. When they combine the three relationships, they do not find a Kuznets relationship. Instead, total industrial water pollution rises rapidly through middle-income status and remains roughly constant thereafter. To explore the implications of their findings, the authors stimulate recent trends in industrial water pollution for industrial economies in the OECD (Organization for the Economic Cooperation and Development), the newly industrialized countries, Asian developing countries, and ex-COMECON (Poland and former Soviet Union) economies. They find roughly stable emissions in the OECD and ex-COMECON economies, moderate increases in the newly industrialized countries, and rapidly growing pollution in the Asian developing countries. Their estimates for the 1980s suggest that Asian developing countries displaced the OECD economies as the greatest generators of industrial water pollution. Generally, however, the negative feedback from economic development to pollution intensity was sufficient to hold total world pollution growth toabout 15 percent over the 12-year sample period.Water and Industry,Public Health Promotion,Environmental Economics&Policies,Sanitation and Sewerage,Pollution Management&Control,Environmental Economics&Policies,Water and Industry,TF030632-DANISH CTF - FY05 (DAC PART COUNTRIES GNP PER CAPITA BELOW USD 2,500/AL,Sanitation and Sewerage,Pollution Management&Control

Inspections and emissions in India : puzzling survey evidence about industrial pollution

Industrial plants face pressure to abate water pollution from many sources, national and local, through formal government regulation and through more informal pressure from consumer groups and concern for the firm's reputation. Formal regulation tends to reflect the bargaining power of local communities and is not as uniform or blind as the law would imply. Regulators are not immune to the pulls and pushes of powerful community interests. Studies of enforcement in the U.S. steel industry, for example, find that it is weaker at plants that are major employers in the local labor market. Using survey data from India, the authors examine whether themonitoring and enforcement efforts of provincial pollution control authorities are affected by local community characteristics (which serve as proxies for political power). They also test for evidence that informal pressure on plants results in negotiated reductions in emissions. They find that high levels of pollution in India elicit a formal regulatory response: inspections. But inspections are ineffective in bringing about changes in behavior, probably because of bureaucratic or other problems in follow-through. Moreover, poorly-paid inspectors with low morale may be susceptible to"rent-seeking."They find little evidence to support the hypothesis that better-educated and higher-income communities are better able to pressure plants to reduce emissions than are poorer communities, although there are significantly more inspections in more developed districts. In India, whatever community pressure exists is probably channeled through formal regulatory mechanisms. Larger plants in India, as in the rest of the world, tend to be"cleaner"than smaller plants. Indian policymakers and regulators may want to explicitly recognize the tradeoff in environmental quality of the existing regulatory bias toward the small- and medium-scale sector.Sanitation and Sewerage,Environmental Economics&Policies,Water and Industry,Water Conservation,Public Health Promotion,Water Conservation,Environmental Economics&Policies,Water and Industry,Sanitation and Sewerage,TF030632-DANISH CTF - FY05 (DAC PART COUNTRIES GNP PER CAPITA BELOW USD 2,500/AL

Roads, population pressures, and deforestation in Thailand, 1976-89

Tropical deforestation is considered one of the major environmental disasters of the 20th century, although there have been few careful studies of its causes. This paper examines the causes of deforestation in Thailand between 1976 and 1989, a period when the country lost 28% of its forest cover. This paper takes the perspective that, in the long run, the determinants of deforestation are the determinants of land use change. While logging and fuelwood gathering may remove forest cover, regrowth will occur, at least in moist tropical forests. For an area to remain deforested, it must be profitable to convert the land to another use, and this use is usually agricultural. In Thailand, for example, agricultural land increased between 1961 and 1988; during the same period, forest land decreased. This paper focuses on what, in equilibrium, determines the amount of land cleared for agriculture. The authors emphasize the quantitative impact of two forces--roads and population pressures--that increase the profitability of converting forest land to agriculture. As aerial maps show, development follows road networks. The magnitude of the impact of roads on commercial and subsistence agriculture depends on soil quality along the road. In this case the Thailand government undertook a road-building program in the Northeast section in the 1970's to encourage settlement of that region as a bulwark against Communist encroachment from Laos. Road building very likely spurred deforestation in the Northeast during the 1970's and 1980's, although the magnitude of its impact is not known. Thailand also experienced rapid population growth during this same period, which may have contributed to deforestation in two ways: the growing population demanding more food, increased the demand for agricultural land; and more importantly, in rural areas where other economic opportunities are limited and squatters are permitted on forest lands, a growing population increased the demand for land for subsistence agriculture. The authors conclude that population pressures play less of a role in deforestation than was found in earlier studies on Thailand. Affecting the amount of deforestation are other factors, such as the profitability of converting the land to another use, natural protection for forests like poor soil and steep slopes, and agricultural price variations.Environmental Economics&Policies,Climate Change,Agricultural Knowledge&Information Systems,Land Use and Policies,Agribusiness,Agricultural Trade,Environmental Economics&Policies,Forestry,Agricultural Knowledge&Information Systems,Climate Change

The effects of domestic climate change measures on international competitiveness

Under the Kyoto Protocol, industrialized countries (called Annex I countries) have to reduce their combined emissions to 5 percent below 1990 levels in the first commitment period of 2008-12. Efforts to reduce emissions to meet Kyoto targets and beyond have raised issues of competitiveness in countries that are implementing these policies,as well as fear of leakage of carbon-intensive industries to non-implementing countries. This has also led to proposals for tariff or border tax adjustments to offset any adverse impact of capping carbon dioxide emissions. This paper examines the implications of climate change policies such as carbon tax and energy efficiency standards on competitiveness across industries, as well as issues related to leakage, if any, of carbon-intensive industries to developing countries. Although competitiveness issues have been much debated in the context of carbon taxation policies, the study finds no evidence that the energy intensive industries’ competitiveness is affected by carbon taxes. In fact, the analysis suggests that exports of most energy-intensive industries increase when a carbon tax is imposed by the exporting countries, or by both importing and exporting countries. This finding gives credence to the initial assumption that recycling the taxes back to the energy-intensive industries by means of subsidies and exemptions may be overcompensating for the disadvantage to those industries. There is, however, no conclusive evidence that supports relocation (leakage) of carbon-intensive industries to developing countries due to stringent climate change policies.Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy and Environment,Environment and Energy Efficiency,Transport Economics Policy&Planning

Trade integration and political turbulence : environmental policy consequences.

This paper contributes to the unresolved issue regarding the effect of economic integration on environmental policymaking. In particular, we discuss the joint impact of trade openness and political stability on environmental policymaking. Our theory predicts that the effect of trade integration on environmental policy is conditional on the degree of political stability. Trade integration affects the stringency of environmental policies due to changes in industry bribery behavior, and the effect is conditional on the degree of political stability. The empirical findings support the theory and are robust to alternative specifications. The stringency enhancing effect on environmental policy of trade integration is greater in politically stable countries

Environmental tariffs on polluting imports

This paper examines the implications for the use of trade measures as “weapons” to address global environmental concerns. There are already proposals in the U.S. senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the U.S. The paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives. Even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances. Their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality. Simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed U.S. tariff. Hence the proposed legislation has very uncertain environmental consequences. Even if the policy has been mainly designed to protect domestic industries, it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs. The analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution. Copyright Kluwer Academic Publishers 1996environmental tariff, pollution abatement expenditures, pollution-intensity, trade policy, transnational pollution,