Research on the Environmental Pollution Being Transferred through International Trade

Analysis based on the game theory has revealed that the two sides of the international trade are gambling against their respective government’s environmental regulations. It is found that, if the environmental pollution costs resulting from a product could not reasonably be internalized into the total cost of goods, together with that the stringent environmental controls amongst all countries are spatially heterogeneous, there will be a problem of environmental pollution evaded through international trade. From the perspective of developing countries that are situated in the export -led economic growth model, if they could have an aim to encourage their enterprises for the export and thus relax their control of these enterprises in the environmental pollution regulations, this will result in a failure to internalize environmental costs. It is equivalent to the fact that exporting countries have taken the costs of environmental pollution for assistant to the importing country. For this reason, internalization of the environmental costs appears to be an inevitable choice for developing countries. The paths for environmental cost internalization options include the Pigouvian taxes, initial quota allocation of emission rights and the Coase’s trading of emissions, an export credits-stimulated system, along with an environmental liability insurance system.