The Environmental Bias of Trade Policy

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Abstract PI Last Name: ShapiroTitle: The Environmental Bias of Trade Policy Proposal ID: 1850790The goal of this project is to advance knowledge on the environmental consequences of trade policy. The project investigates the extent to which tariffs and other policies affect pollution emissions. The research analyzes the relationship between the amount of pollution an industry emits and the trade and environmental policies the industry faces. The research also looks at the reasons for such relationships and studies the environmental and economic consequences of changing existing policies. More broadly, this project assesses the interactions of trade policy, environmental policy, and environmental and trade outcomes. An optimal policy would charge a uniform price on all global greenhouse gas emissions, since greenhouse gas emissions create the same environmental externality regardless of where they are emitted. The world is not close to this optimal policy and currently regulates only a small share of global greenhouse gas emissions, typically at low and heterogeneous prices. This research provides comparisons of tariffs and non-tariff barriers against pollution emissions. The research also investigates explanations for these patterns, including the potential importance of an industry's upstream location (i.e., the extent to which it sells output to other firms as intermediate goods rather than to final consumers). Additionally, the research investigates how counterfactual trade and environmental policies would affect pollution and social welfare.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.