Environmental Effects of International Trade Jeffrey Frankel Harpel Professor Harvard Kennedy School Harvard University EXPERT REPORT NO. 31 TO SWEDEN’S GLOBALISATION COUNCIL The author acknowledges capable research assistance by Danxia Xie; valuable input from Joseph Aldy, Scott Barrett, Jagdish Bhagwati, Thomas Brewer, Steve Charnovitz, Arik Levinsohn, Gary Sampson and Robert Stavins; and useful com- ments on the first draft from Pontus Braunerhjelm, Prasanth Regy, Rob Stavins, Helena Svaleryd, and Danxia Xie. EXPERT REPORT NUMBER 31 TO SWEDEN’S GLOBALISATION COUNCIL © GLOBALISATION COUNCIL AUTHOR Jeffrey Frankel GRAPHIC DESIGN Nina Gergi ORIGINAL Susan Berg PRINT Edita, Västerås 2008 PHOTO Colorbox ISBN 978-91-85935-30-7 ISSN 1654-6245 ORDER The Globalisation Council PHONE +46 8 405 10 00 E-MAIL
[email protected] www.sweden.gov.se/globalisation Preface Is globalization bad for the environment? Trade has some of its effects through the channel of accelerating economic growth, because trade contributes to growth analogously to investment, technological progress, and so on. Although growth is bad for air and water pollution at the initial stages of industrialization, later on it reduces pollution as countries become rich enough to pay to clean up their environments. The report Environmental Effects of International Trade considers whether globalisation has damaged environmen- tal goals. Empirical studies of cross-country data generally find no detrimental effects of trade on some measures of environmental degradation such as local SO2 (sulphur di- oxide) air pollution, controlling for income. The evidence does suggest that trade and growth can exacerbate other measures of environmental degradation, however, particu- larly CO2 emissions (carbon dioxide).