Economic Analysis on Trade of Circular Materials — An Analysis on Environmental Damage in Importing Country
Recently, the trade of used goods for recycling has increased in Asia. If used goods are recycled as resources with proper treatment in importing countries, such trade will contribute towards the efficient use of scarce resources. However, not using proper treatment in the recycling process may cause environmental damage in the importing country.
Although the Basel Convention restricts the trade of toxic waste, it still allows the trade of used goods for recycling; hence the potential for environmental damage with used goods trade and recycling. Then we need compatibility between the promotion of proper trade and environmental conservation for international recycling. In order to consider this problem, we build an international trade model of used goods with potential for environmental damage on recycling.
In this paper, we model a situation where a certain country imports used goods for recycling, focusing on the behavior of said country. With this basic model, we will analyze the effects of environmental and trade policies on environmental protection and trade of used goods for recycling. In section 2, we show the framework of the model and the first-best policy. In section 3, we consider the second-best policies; import tariff for used goods for recycling and subsidy for abatement. In section 4, we examine the effects of two policies on environmental damage and the quantity of imported used goods for recycling. Finally we observe our conclusions.
Keywordsenvironmental damage waste tariff subsidy
JEL ClassificationQ53 Q56
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