ABSTRACT
This chapter explores options for environmental policy instruments to tackle trade-related environmental challenges and evaluate options for developing and emerging economies to choose from. International trade and investment are the channels through which environmental policies transmit from one country or region to another. The sustainability challenges may originate in various manners, namely concentration of environmentally damaging industries, overexploitation of natural resources, and emission of greenhouse gases (GHGs) and so on. The Environmental Kuznets Curve Hypothesis (EKCH), the growing income level of a country can significantly influence its environmental sustainability. The Pollution Haven Hypothesis (PHH) deals with environmental degradation scenario originating from foreign direct investment (FDI) inflows towards the pollution-intensive sectors/regions. The Factor Endowment Hypothesis (FEH) argues that a country will specialize in the most abundantly available resource and accordingly lead to sustainability challenges. Border trade adjustments (BTA) are instruments to provide a level playing field to domestic producers where environmental standards are stringent.
