The theoretical claims for eco-tariffs are rigorously analyzed
within a unified framework formed of an international trade model
enriched with both a domestic and a global externality. During the
course of the analysis the model is modified to analyze an array of
contexts for which eco-tariffs have been claimed to improve
environmental quality or welfare. The circumstances and conditions
are characterised under which such tariffs can be shown to improve
environmental quality and social welfare, taking account of general
equilibrium effects. The theoretical results are applied in a
policy analysis of eco-tariffs and other trade instruments in the
context of domestic and global environmental policy in order to
assess the relevance of the eco-tariffs that have been subjected to
the theoretical analysis. Finally, the GATT/WTO rules and
regulations are presented, since to date these have banned the use
of eco-tariffs. The rules and regulations are mapped against the
theoretical results to show which rules ought to be changed.
General
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