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I'm trying to put together a literature review of papers tackling the international spillovers of environmental policies, particularly theoretical contributions. I haven't been able to find much.

Any help appreciated.

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  • $\begingroup$ International spillovers? Do you mean 1) environmental spillovers, eg a country has weak policies on air pollution leading to pollutants blowing into neighbouring countries, OR 2) economic spillovers, eg a country has weak policies on air pollution leading firms in polluting industries to locate there to take advantage of lower costs of meeting their standards? Or perhaps both, or something else? $\endgroup$ Commented Mar 27, 2023 at 16:50
  • $\begingroup$ Sorry if I was not sufficiently clear in my question. But yes indeed both. As well as when a country engages in pollution reduction unilaterally. $\endgroup$
    – user37250
    Commented Mar 27, 2023 at 19:20

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There is quite a large literature on this topic. Here is a selection, and the references at the ends of these papers will lead to many more.

Van der Laan & Moes (2012) present a model for analysing international river pollution problems, in which countries along rivers derive benefit while causing downstream pollution but also suffer the effects of pollution from upstream. LaTorre, Liuzzi & Marsiglio (2021) consider the implications of transboundary pollution externalities on environmental policy-making, emphasising the importance of the spatial features of the pollution.

Sheldon (2006) considers the hypothesis that competition between trading countries leads to a “race to the bottom” in environmental standards and policies, and argues that GATT/WTO rules tend to counter such an effect.

In contrast to the “race to the bottom” hypothesis, the Porter hypothesis claims that strict environmental standards in a country can improve its trading position by stimulating innovation and so increasing productivity. Ambec & Barla (2001) present a theoretical foundation for the hypothesis, and Ambec, Cohen, Elgie & Lanoie (2011) provide an overview of relevant theoretical and empirical insights.

The pollution haven hypothesis can be regarded as a more moderate version of “race to the bottom” suggesting that, at the margin, pollution-intensive industries will relocate in countries with lower environmental standards. Mani & Wheeler (1997) test this hypothesis against data for the period 1960-95. Kuna-Marszalek (2019) reviews more recent theoretical analysis and empirical studies of the hypothesis.

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