The linkage between trade and environment has been debated for several decades. The first chapter of my thesis examines how differences in environmental regulations across countries may affect trade patterns and pollution emissions when pollution is created by consumption. I develop a model of trade with new and used automobile choice and demonstrate that trade necessarily lowers emissions from the dirty good exporter and trade has a channel to lower emissions from the dirty good importer. Empirical results show that Mexico imported 6 million used cars from 2005 to 2010, which raises car emissions of major pollutants from Mexico by over 20%: emission intensity differences across countries lowers car emissions by less than 1% and is denominated by emission rise through a larger and older car fleet.
Clean technologies curb global emissions but require as inputs rare earth elements (REEs), which pollute the local environment. China, the major producer of REEs, has been challenged at the WTO for its export restriction on REEs and has proposed to switch to a domestic environmental policy. In the second chapter, my coauthor and I examine these policies in a model with a vertical market structure in which governments trade of concerns for the local and global environments with the rent-shifting benefits of strategic policies. We find that replacing the trade policy on REEs with a domestic environmental policy will hurt global clean tech industries and other countries do not necessarily benefit from this change.
In the standard theory of international trade, each of the production factors is inexhaustible. To understand how the exhaustibility of non-renewable resources works, in the third chapter, my coauthor and I analyze dynamically consistent extraction equilibria of non-renewable resource extraction, where firms move sequentially within each period and where both the leader and follower have market power. We show that the leader is able to manipulate extraction patterns by exploiting resource constraints. Unlike static Stackelberg games, the follower does not necessarily have a second mover disadvantage.