Trade from resource-rich countries avoids the existence of a global pollution haven hypothesis

Abstract

Free trade agreements are currently receiving much attention in the media and politics. One important question concerning free trade is its effect on the environment, for example in carbon dioxide emissions. The goal of this paper is to provide evidence on the validity of the pollution haven hypothesis using a multi-regional input-output approach for six regions and the rest of the world as a whole. Our findings indicate that in the period from 1995 to 2009, international trade has allowed the global economy to reduce its overall CO2 emissions, compared to a hypothetical situation without international trade. The total amount of emissions saved was 15.06 Gt in the period under consideration. However, not all of the seven regions in our model have been able to reduce their CO2 emissions through trade. Global value chains have led to China becoming a pollution haven for other regions and its exports have increased world emissions to 1.28 Gt CO2 in 2008. However, what allows a net saving of emissions on a global scale is the supply of energy and natural resources from a set of peripheral economies, which in our geographical categorization are mostly integrated in the region of the rest of the world.