TRADEGREEN

The TRADEGREEN project examines public policies aiming at reconciling international trade with our environment: the carbon border adjustment mechanism (CBAM), subsidies on decarbonated technologies, and environmental provisions in trade agreements. The first two policies reduce carbon leakage. The CBAM can be combined with free emission allowances, with export rebates, or with public investment in technological change. The impact and efficiency of these instruments are investigated in an economic model in which international trade and firms' investment in decarbonated technologies are endogenous. The model is calibrated on European data to obtain estimates. The environmental provisions of trade agreements are analyzed in a framework with asymmetric information about the signatory countries' willingness to protect the environment. Our goal is to come up with environmental provisions that mitigate the harmful impacts of trade on ecosystems, for instance by making the reduction of tariffs contingent on the adoption of more stringent environmental standards. The theoretical analysis is complemented with two empirical evaluations. The first investigates the relationship between the signatory countries' environmental values and policies with the environmental provisions of the trade agreements in various issues such as biodiversity, climate change, GMOs, pesticides, or air quality. The second study focuses on the agreement between the European Union and the Mercosur. Using administrative, economic, and satellite data, we calibrate the theoretical model to estimate tariff cuts on agricultural products contingent on measurable targets on deforestation reduction in the Brazilian Amazone. TRADEGREEN aims at improving our understanding of environmental and trade policies, and quantifying their impact on economics, trade, and our planet.