ABSTRACT
This chapter focuses on how environmental policies affect international trade flows and examines how changes in trade policy affect the environment. Most economists agree that environmental problems are conceptually the same as negative externalities. They arise because control rights for resource attributes are not fully allocated. In the literature that examines the effects of environmental policy on trade, most empirical results suggest that there is much ado about nothing. New data sources need to be exploited. Satellite images provide a potentially rich source for economic analysis of the environment. They have the advantages of providing data from the early 1970s to the present, and being geo-referenced. There has been a tendency in the literature to theorize about existence and site values rather than to use accepted social cost-benefit techniques to quantify more readily measurable and less controversial external costs.
