Is There a Trade-Off between Trade Liberalisation and Pollution Abatement in Costa Rica? A Computable General Equilibrium Assessment

NOTE: The following is a description of the paper, and not the actual abstract. Trade and environment linkages are under increasing scrutiny, and a vast literature has emerged on the subject. Important linkages have been identified and major conclusions have been drawn in terms of economic policy. However, many questions still remain. Most countries are now engaged in a trade liberalisation process, while being aware of environmental problems, and the coherence between environmental and trade policies is a major concern. This paper aims at offering a quantitative analysis of the linkages between economic activity and the environment in Costa Rica, and specifically at evaluating the joint impact of environmental and commercial policies. Three main aspects of the CGE model presented in this paper account for its specificity with respect to previous analysis. First, it embodies a high level of disaggregation for pollutants, products, sectors and types of households. Second, this model explicitly includes dynamic features so that growth interdependencies of environmental and commercial policies can be studied. Third, most economy-wide studies on growth and environment linkages rely on effluent intensities associated with output, and do not allow for substitution between non-polluting and polluting factors. By contrast, in our model pollution emissions are linked to polluting input use, rather than output. Technical adjustment by substituting non-polluting factors to polluting factors may therefore be assessed