The pollution terms of trade and its five components

Abstract

Based on two extensions, this paper proposes a re-appraisal of the concept of the pollution terms of trade (PTT) introduced by Antweiler (1996). First, detailed data allows capturing the effect of differences in emission intensities across countries and over time. Second, relying on Johnson and Noguera (2012), the revised PTT index controls for trade in intermediate goods and is based on value-added rather than gross output figures. Applied to a database for SO2 emission intensities for 62 developed and developing countries over the 1990–2000 period, it turns out that the first extension has a larger empirical importance than the second one. The global pattern is one in which the major rich economies exhibit a PTT index below one (higher pollution intensity in imports than in exports). Trade imbalances tend to exacerbate this asymmetry, allowing rich economies to further offshore their pollution through trade.