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Transboundary pollution often affects natural resources in downstream countries. The harmful impact of upstream pollution on agricultural land use has been scantily studied. This paper models transboundary pollution and argues that in the presence of international trade between contiguous countries the polluter may find it incentive-compatible to abate pollution at the source. In particular, if the trade prospects in the upstream country depend on crucial inputs imported from the downstream, which gets affected by effluents, then the free-riding problem with abatement goes away. Further, if the upstream country cares about the welfare of its workers more than the owners of capital it would unambiguously enforce pollution abatement for its firms.

Bihong Huang and Eden Yu (Eds), Ways to Achieve Green Asia 2020, Asian Development Bank Institute. 344 pp., ISBN: 978-4-89974-211-1 (Print), ISBN: 978-4-89974-212-8 (PDF).

This paper measures the ‘emission intensity’ of the fifteen organized manufacturing and agricultural sectors in India. Our primary objective and contribution in this paper are in obtaining a direct relation between technological adoption (greater capitalization) and emission intensity at the industry level over a period of fourteen years between 1996 and 2009. We use the Environmentally Extended Input–Output (EEIO) model to calculate the direct, upstream and total emission intensity generated through the entire supply chain of production and consumption. From the fixed effects panel regression results we note that technological adoption helps to reduce emission intensity across industries, although, beyond a critical level it raises the intensity. Importantly, when better technologies are adopted for production of export goods as against non-traded goods, emission falls in a significant way.

The paper empirically investigates whether developing countries may use trade policy as an alternative to environmental policies in order to control carbon emission. It measures the effectiveness of the existing ‘Most Favored Nations’ (MFN) tariff rates applicable to lower-middle income countries and for countries sorted on the basis of manufacturing-to-trade shares, in lowering carbon emission. By applying a fixed effects panel regression method over 16 years, it is found that the MFN tariff rate helps these economies to reduce carbon emission substantially. In addition, the role of foreign direct investment as purveyor of clean products is explored at the cross-country level. The results, at least on the ground of better environmental standards, indicate the need to re-evaluate the choice for protection under the domain of multilateral trade negotiations.