Effects of changes in globalisation on the environment

International Trade and Globalisation – Globalisation and Trade Restrictions

Objective: Effects of Changes in Globalisation on the Environment

Globalisation refers to the increasing integration of world economies through trade, investment, migration and the spread of technology. While it can boost economic growth, it also has significant environmental consequences. Understanding these effects helps learners evaluate policy choices such as trade restrictions, environmental regulations and international agreements.

1. How Globalisation Influences the Environment

• Scale of Production – Larger markets encourage mass production, often leading to higher resource use and waste.
• Transportation – Greater volumes of goods are moved over long distances, increasing fuel consumption and emissions.
• Technology Transfer – Advanced, cleaner technologies can spread, but outdated, polluting technologies may also be exported.
• Resource Allocation – Comparative advantage may shift production to countries with abundant natural resources, sometimes resulting in over‑exploitation.
• Regulatory Differences – Firms may locate in jurisdictions with weaker environmental standards (the “pollution haven” hypothesis).

2. Positive Environmental Impacts of Globalisation

1. Diffusion of Green Technology

   International trade enables the spread of renewable energy equipment, efficient machinery and environmentally‑friendly processes.

2. Scale Economies in Clean Production

   Large‑scale production can lower the average cost of clean technologies, making them more affordable for developing countries.

3. International Environmental Agreements

   Global trade networks create platforms for cooperation, such as the Paris Agreement, which set common standards.

3. Negative Environmental Impacts of Globalisation

1. Increased Carbon Emissions

   Transport of goods by sea, air and road contributes significantly to CO₂ emissions. For example, maritime shipping accounts for about 3 % of global CO₂ emissions.

2. Resource Depletion

   Higher demand for raw materials can lead to over‑mining, deforestation and loss of biodiversity.

3. Pollution Havens

   Companies may relocate production to countries with lax environmental regulations, concentrating pollution in those regions.

4. Waste Transfer

   Developed nations often export e‑waste to developing countries, creating health and ecological hazards.

4. Trade Restrictions as Environmental Policy Tools

Governments may use trade measures to address environmental concerns. The main instruments are:

• Tariffs on Polluting Goods – Higher duties on products with high carbon footprints encourage greener alternatives.
• Import Quotas – Limiting quantities of environmentally harmful imports (e.g., timber from illegal logging).
• Export Bans – Prohibiting the export of scarce natural resources or endangered species.
• Border Carbon Adjustments (BCAs) – Charges on imported goods based on their embedded emissions.

5. Comparative Table: Trade Restrictions vs. Environmental Outcomes

6. Case Study: The “Pollution Haven” Debate

Consider the relocation of textile manufacturing from Europe to South‑East Asia during the 1990s. The move was driven by lower labour costs and weaker environmental regulations. Environmental impacts included:

• Increased water pollution from dye effluents.
• Higher local air emissions from coal‑fired power plants.
• Reduced overall global emissions per unit of output due to lower energy intensity in newer factories.

Policy responses varied:

1. European Union introduced Eco‑Design standards for imported textiles.
2. Some Asian governments implemented stricter wastewater treatment requirements.
3. International NGOs promoted voluntary certification (e.g., GOTS – Global Organic Textile Standard).

7. Modelling the Environmental Impact of Globalisation

Economists often use a simple model to illustrate the trade‑off between economic output (\$Y\$) and environmental degradation (\$E\$):

\$\$

E = \alpha Y^{\beta}

\$\$

where \$\alpha > 0\$ reflects the intensity of resource use and \$\beta\$ captures the elasticity of pollution with respect to output. Globalisation can affect both parameters:

• Technology transfer may reduce \$\alpha\$ (more efficient production).
• Scale effects may increase \$Y\$, potentially raising \$E\$ unless \$\beta < 1\$.

8. Summary Points

• Globalisation can both harm and help the environment; the net effect depends on technology, regulation and consumer behaviour.
• Trade restrictions can be used to internalise environmental costs, but they must be carefully designed to avoid undue economic distortion.
• International cooperation (e.g., carbon pricing, standards) is essential to address cross‑border environmental impacts.
• Students should be able to analyse case studies, interpret simple models and evaluate policy options.