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CID Working Paper No. 53

Environment and Development Paper No. 1

Globalization and Environment

Theodore Panayotou

July 2000

Abstract

Economic globalization impacts the environment and sustainable development in a wide variety of ways and through a multitude of channels. The purpose of this paper is (a) to identify the key links between globalization and environment; (b) to identify the major issues addressed in multilateral economic agreements in trade and finance that affect environmental sustainability; and (c) to review priority policy issues affecting the environment in multilateral economic agreements and environment, thus identifying incentives implicit in trade and investment policy measures that affect environmental sustainability. The author categorizes these issues under the primary areas of globalization: trade liberalization, investment and finance, and technology diffusion, the latter including intellectual property rights.

In the case of the trade-environment interface, the paper examines the impact of both elements, and the causal relationship between them. It also pays special attention to multilateral environmental agreements and their potential effects on trade. An integrative section on the effects of globalization and environmental policy and performance leads to domestic and international priority policy issues and recommendations.

The author concludes that globalization brings with it potentially large benefits as well as risks. The challenge is to manage the process of globalization in such a way that it promotes environmental sustainability and equitable human development. In short, the more integrated environmental and trade policies are, the more sustainable economic growth will be and the more globalization can be harnessed for the benefit of the environment.

Keywords: environment, globalization, international trade

JEL codes: F18, O13

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