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Tuesday, June 6th 2023

Thais Nunez-Rocha (LEO-Université d’Orléans) will present “What type of trade is promoted by environmental regulations?".

The objective of this paper is to investigate the extent to which international trade is affected by environmental stringency. The impact of environmental regulations on exports is evaluated by using a gravity model of trade, which is estimated for a global sample of countries over the period from 1995 to 2015, distinguishing between clean, footloose, and dirty products. This enables us to investigate whether more stringent environmental provisions and environmental laws lead countries to relocate dirty production and exports, as predicted by the Pollution Haven Hypothesis. Data on environmental provisions that are legally enforceable is obtained from the Deep Trade Agreement dataset (World Bank) and environmental laws and treaties are from Ecolex. Our results show that, in aggregated form for the deeper environmental provision we can expect a decrease in trade of “normal” goods, but not those of the dirty and footloose products. When focusing about the combinations with legislation, only national laws seem being working.  The environmental provisions and laws, de jure, the domestic legislation does exert a significant effect on trade, we observe a decrease in trade of the deepest categories of the provisions but this only holds for footloose and not dirty products and is mostly true for the exporter, and combined with the deepest environmental provisions, confirming the Pollution Haven Effect.