Consumption-generated Pollution And Strategic Environmental Policy In International Trade

This dissertation aims to introduce the existing strategic environmental policy (SEP) theory into China, so as to promote the country's research in the field, and to construct a model of differentiated abatement towards consumption-generated pollution (CGP), whereby analyzing the strategic effect of three environmental policies and/or measures: (1) the R&D investment policies by a developed country and an LDC towards CGP, (2) emission standards set up by a developed country towards products with CGP, and (3) eco-labelling set up by a developed country towards products with CGP, so as to achieve the development of the existing SEP theory from the aspect of CGP.Since conventional trading instruments, such as tariff, subsidy, etc., have to be governed by WTO rules, governments of more and more countries have to turn to seek for other instruments to shift rent. They add into their arsenal of industrial and trade policies such items as emission standard, abatement subsidies, and emission tax. In order to maintain international competitiveness, environmental policy has evolved to become industrial policy, and even trade policy. SEP theory provides a new thought for research on how governments seek for other instruments to shift rent, i.e., how their strategic trade policy varies under the restraint of free trade. This dissertation outlines the framework of the theory, reveals its theoretical foundation, sums up, compares, and comments on its major models. Constructed on the basis of production-generated pollution (PGP), all the models of the existing literature are utilized to analyze SEP towards PGP, achieving the conclusion of eco-dumping. There are in reality, however, tremendous circumstances of CGP. With reference to the standard model of vertical product differentiation, a model of differentiated abatement is constructed, which makes it possible to explain SEP towards CGP leading to green barrier to trade.The construction of the differentiated abatement model is based on the considerations that consumer utility is made up by abatement towards CGP, that a firm has an investment of abatement towards CGP, and that in the market where the differentiated abatement products are sold, the social welfare function must take into account of the negative externality of consumption. Damages caused by CGP to the consumer himself/herself can be illustrated by the utility made up by abatement, and damages caused by CGP to people other than the consumer or to environment can be illustrated by the cost deducted from the social welfare. Such a model construction, on one hand, makes it possible to enlarge the existing SEP research from the aspect of CGP, and, on the other hand, introduces a model with consumption externality into vertical product differentiation studies. Firstly, the differentiated abatement model is used to analyze the R&D investment policies by a developed country and an LDC towards CGP involved in bilateral trade. The literature on vertical product differentiation indicates an asymmetry in product R&D policy, which is characterized by an investment subsidy in an LDC and an investment tax in a developed country, whereas this dissertation yields a symmetry in CGP abatement R&D policy, which is characterized by an investment subsidy in both countries, due to the introduction of negative externality of consumption. Secondly, the differentiated abatement model is used to analyze and compare emission standard and import quota in terms of their effect to trade and social welfare of a developed country and an LDC involved in bilateral trade. This dissertation indicates that emission standard adopted by the developed country constitutes non-tariff barrier to low abated product from the LDC in short term, whereas it increases the abatement as well as the export of the LDC in long term. Literature on vertical product differentiation shows minimum quality standard (MQS) reduces the social welfare of the home country, in the contrast, this dissertation reveals the emission standard adopted by the developed countr...