Complying with the Kyoto Protocol under Competitive and Environmental Pressure: From the Viewpoints of Industrial Structural Reform and Trade Policy

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Standard eco-efficiency analysis has typically focused on changes in the production technologies and consumption in the being investigated. These studies have conventionally examined the reasons underlying changes in eco-efficiencies and more-efficient activity vectors of both desirable and undesirable outputs, such that the goods are maximized and the bads are minimized. In contrast, this paper focused on international eco-efficiencies and evaluated more-efficient activity distributions within the context of total domestic final demand at the international level being maximized under conditions of stringent environmental constraints (Kyoto regulation). This paper presents three major findings. First, competitive pressure and Japanese compliance with the Kyoto Protocol did not turn China into a pollution haven. Emissions decreased in both China and Japan as a result of free trade. Second, a $1 billion increase in net Japanese exports is accompanied by a decrease in Japanese eco-efficie … More ncy and an increase in Chinese eco-efficiency. Global eco-efficiency increases as net exports from Japan decrease. Third, Japanese eco-efficiency improves at the expense of decreased eco-efficiency in China, an increase of $1,000 per ton carbon in Japanese eco-efficiency results in a decrease of $223 per ton carbon in Chinese eco-efficiency under scenarios of free factor mobility and free commodity trade. The first finding corroborates that of Dietzenbacher and Mukhopadhyay (2007), who also found that China was not a pollution haven in 1995. In addition, an important consideration in this regard is that competitive pressure and Japanese compliance with the Protocol did not contribute to turning China into a pollution haven and that, from an environmental perspective, China and Japan both benefit from free trade. Conversely, the second and third findings imply that if we focus on national eco-efficiencies, China and Japan cannot establish a relationship in which the eco-efficiencies of both countries will improve. Less