Environmental Justice Vs Inclusive Growth: A General Equilibrium Inquiry into Possible Trade-offs

The present chapter seeks to bring out an important flipside of environmental regulation facing trade between developed and less developed countries. The wake of environmental sanctions, much typical of the foreign trade policy of developed countries vis-à-vis less developed ones, in the name of countering ecological dumping, may help in reducing the carbon footprint for the latter. Now, this apparently has positive implications for the environment, but it is traded off for growth. However, the other end of this positive development is how the pursuit of protecting the environment against the proliferation of environmentally sensitive economic activities (sourced to the informal economy) may add strength to dualistic economic structures typical of less developed countries. In the light of this dichotomy, the chapter develops a three-sector general equilibrium model drawing on Jones (1965) and Beladi and Marjit (1996) to unfold such potential trade-off of instituting environmental sanctions facing foreign trade flows, thereby leaving a strong imperative for having counterbalancing efforts at the policy-making level.