ABSTRACT
The intensification of certain environment-sensitive economic activities (e.g. mining, ship-breaking), in line with growing international commercial operations in these categories, might bear adverse environmental repercussions in a country in the following manner. First, mislaid thrust on an export-led economic growth model might deplete the stock of natural resources in a developing country/LDC (less-developed country) that traditionally depend considerably on primary items including marine resources, mining and forestry products. Second, the relatively less stringent environmental standards in a developing country/LDC might encourage the players from developed countries to shift their production activities with higher pollution potential in the former location. Alternatively, foreign direct investment (FDI) from the developed countries might come to the developing countries targeting such sectors. As a result, developing countries may specialize in the production of commodities characterized by a higher pollution load and export the final product to developed countries. This leads to an increase of environmental degradation in the South but reduction of the same in the North. The phenomenon of growing degradation in a country characterized by relatively weaker environmental standards/policy, or with lesser willingness and capacity to enforce them through a trade or investment route in this manner is termed as ‘pollution haven hypothesis’ (PHH) in international trade literature (Lucas et al. 1992; Xing and Kolstad 1998; List and Co 1999; Eskeland and Harrison 2003; Cole and Elliott 2005).
