The Environmental Impact of International Trade: Measuring How Changes in Trade Lead to Different Levels of Polluting Emissions

Abstract

In the recent years, the awareness of the negative impact that economic activity has on the environment has increased enormously, and countries in the international community are realizing that such environmental degradation is an urgent issue that demands immediate and convincing solutions. However, despite a common interests in the environmental preservation, countries also face economic interests, and push international negotiations to be able to increase their production and, consequently, their emissions. In front of such challenge, academic research has tried to better understand the economic drivers hiding behind environmental degradation to provide international institutions with new solutions, and one special issue that has received much attention has been international trade. In particular, the present study delves into this question, addressing the particular relation that exists between trade and global emission of polluting gases. Based on the application of Input-Output Analysis and the use of Environmentally Extended World Input-Output Tables, this study provides a measure of the impact that actual trade has on emissions of greenhouse and local gases by considering the situation of total reduction in international trade (counterfactual). Finally, results rise important considerations in terms of economic and environmental efficiency, as well as some important policy implications.