Abstract This paper quantifies how international trade affects CO 2 emissions and analyzes the welfare consequences of regulating the CO 2 emissions from shipping. To this end, the paper describes a model of trade and the environment, compiles new data on the CO 2 emissions from shipping, and estimates key parameters using panel data regressions. Results show that the benefits of international trade exceed trade's environmental costs due to CO 2 emissions by two orders of magnitude. While proposed regional carbon taxes on the CO 2 emissions from shipping would increase global welfare and increase the implementing region's GDP, they would also harm poor countries.

Citation Shapiro, Joseph S. 2016. "Trade Costs, CO 2 , and the Environment." American Economic Journal: Economic Policy , 8 (4): 220-54 . DOI: 10.1257/pol.20150168 Choose Format: BibTeX EndNote Refer/BibIX RIS Tab-Delimited