Multilateral Reforms of Trade and Environmental Policy

• Published in: Review of international economics Vol. 12; no. 3; pp. 321 - 336
• Main Authors: Turunen-Red, Arja H., Woodland, Alan D.
• Format: Journal Article
• Language: English
• Published: Oxford, UK and Malden, USA Blackwell Publishing Ltd 01-08-2004; Wiley Blackwell
• Series: Review of International Economics
• Subjects: Economic models; Economic theory; Environmental policy; Environmental tax; Fiscal policy; Globalization; International economics; International trade; Multilateral trade; Pollution; Reforms; Studies; Tariffs; Tax reform; Trade policy
• ISSN: 0965-7576; 1467-9396
• DOI: 10.1111/j.1467-9396.2004.00452.x

The paper analyzes environmental tax policy reform using a competitive model of world trade that includes production‐generated environmental damage (pollution) and trade tariffs. The authors examine the feasibility of Pareto‐improving multilateral reforms of environmental taxes, and show that any environmental tax reform that is mutually welfare‐improving when compensating lump‐sum transfers are assumed is also welfare‐improving when a suitable tariff reform (but no transfers) is combined with the tax changes. Several specific reform proposals are developed. These results expand the feasible set of mutually improving policy proposals for international policy initiatives.