Abstract
This paper presents a critical survey on the main issues of the use of environmental policies as a strategic trade policy. In a context of strategic interactions in an international oligopoly, the adoption of an environmental policy creates two distornionary effects : a rent shifting effect and a pollution shifting effect. While in a short run perspective a goverment can rise environmental standards as protectionist measure, profit shifting requires that it can relax the environmental standards in the mid and long run.When we take into account the ecological externalities, taxes and subsidies achieving the profit-shifting are revisited to a lower level. We discuss numerous case studies in the light of the main theoretical results.
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