Analyzing the Twin Effects of Trade and Population Ageing on the Environment
Creators: name: Abbes, Chahreddine
Publisher: name: Université d'Ottawa / University of Ottawa
Year: 2011
Subjects: Population Ageing and the Environment
Trade and Environment
North South trade and environment
Dual effect of trade and population ageing on the environment

description: Chapter One: When is Free Trade Good for the Environment? This paper provides the conditions under which free trade reduces the emission of pollution. In this paper, we construct a computable general equilibrium model of free trade and environment. Using data from different countries with different characteristics with respect to the stringency of their environmental and trade policies and factor endowments, we simulate a reduction on import tariffs and measure the impact on the volume of emission. Our main findings show that, for a combination of relatively high capital to labour ratio and low level of protectionism, if a country exports the polluting good then, trade liberalization increases the level of emission. Whereas if the country exports the clean good, then the effect of an import tariff reduction on the emission level is positively related to the variation in the producer’s price of the polluting good. Furthermore, we find that under a relatively low level of capital endowment for a country that exports the polluting good, the impact of free trade on the environment depends on the degree of protectionism. // Chapter Two: Ageing and the Environment in an Overlapping Generations Model. We empirically investigate the impact of population ageing on the environment using an overlapping generations model. We decompose the impact into scale, composition, and cohort effects. Using data from the Canadian economy, we simulate the impact of demographic shock on the volume of emission. Population ageing results mostly from a baby bust that follows a baby boom. The demographic transition is characterized by an increase then a decline in the population growth rate. Under the first part of the transition, we find that the scale effect generates more pollution. However, if young generations are more concerned about the environment, an increase in the population growth rate may improve the environment via the composition effects. On the other hand, a decline in the population growth rate (population ageing) creates the opposite results. We further find that cohort effect is positively related to the environment when there is a higher degree of awareness towards a cleaner environment. By comparing scale to both composition and cohort effects, we find that scale dominates both effects, so population ageing causes the level of pollution to fall. // Chapter Three: Does Population Ageing in the North Leads to More Pollution in the South? We construct a two-country model: a rich country (the North) with relatively high level of capital endowment and stringent environmental policy and a poor country (the South) with less stringent environmental policy. Both countries produce a clean and a polluting good and both have access to an exogenous abatement technology. The paper has three main foci. First, it provides an empirical test for the pollution haven and the factor endowment hypotheses. Second, it introduces the issue of population ageing in the North into the question of trade liberalisation and the environment. Finally, it investigates the impact of demographic and trade shocks on the level of emissions in both countries. Results from simulations suggest that an increase in the population growth rate increases the volume of emission in the long run. However, population-ageing generates an opposite effect. In the short term, the scale dominates the composition effect. Empirical evidences show that the level of emission is positively related to the size of population. With respect to trade, pollution increases in the North and falls in the South. Also, we find that demographic changes dominate trade liberalization. Finally, worldwide free trade is bad for the environment, but its effect is marginal.