Essays on the environment and international trade

Conventionally, it is believed that global environmental protection is subject to free-riding and thus, its production will be sub-optimal as in all other public goods. In a basic ricardian model, I show that this conventional result will not hold when the trade connections between countries are incorporated into the analysis of global environmental protection. Essentially, allocating resources from private sector, which engages in international trade of goods and services, to environmental sector generates positive terms of trade effects, which drive the following results under some plausible conditions: (i) Nash equilibrium of the environmental game (contribute to global protection or not) does not support free-riding; (ii) contrary to the common belief, this non-cooperative Nash equilibrium contribution of countries to global environmental protection exceeds the level associated with cooperative solution. Finally, the higher the "volume" of international trade, the smaller will be the free-riding incentives associated with global environmental protection.; An equally interesting subject is the impact of environmental regulation on the competitiveness of the regulated firms. Recently, the conventional view that stricter environmental regulations at home will affect the international competitiveness of the domestic firms negatively, has been challenged under the conditions that the regulated firms engage in innovation and that the environmental regulation is incentive-based. (This revisionist idea is known as Porter hypothesis.) Theoretical work in this literature does not give much credit to Porter hypothesis, and empirical work is indecisive. I investigate regulation-competitiveness debate in a two-country model with tradable emissions permit used as environmental regulatory regime. This time, my results are supportive of conventional case. Introduction of a new idea that environmental regulation not only affects supply side but also demand side of the economy (not considered before in this literature), so that consumers may have preference for the good that is produced in a cleaner way as in the case of eco-labeling, undermines the view of conventional school, but, it does not provide enough evidence for revisionist school either.; Finally, I take up the design of environmentally beneficial transfers from North (developed and environmentally conscious countries) to South (developing and less environmentally conscious countries). I present a framework where the interesting question whether North should transfer technology or money can be answered in a general incomplete information model. Under incentive compatibility, it is shown that if the technology transfer is of a special form, it is always dominant to subsidy case. I also analyze the cases of more general technology transfers and determine the conditions under which technology transfer is preferred to subsidy by North.