The short and long-run effects of international environmental agreements on trade

Does the ratification of an international environmental agreement (IEA) reduce a country's competitiveness on world markets? In this paper, we take gravity regression approach to answering question by using industry-level bilateral trade data and employing time-varying country fixed effects control for endogeneity treaty participation. Based sample >200 countries over 40 years, find that ratifying IEA results in significant compositional shift towards exporting cleaner importing dirtier manufacturing goods. addition, lagged Kyoto Protocol as goods becomes even stronger long run. However, little evidence IEAs contributed overall decline exports uncover only small insignificant median-polluting industry.