EU enlargement and environmental policy

Table 11 Carbon trade (in Mtons CO2)

6. Conclusions and some remarks for further research

This paper analyzes the impacts of different environmental policies in the process of
the EU enlargement. Since the Europe agreements between the EU and the CEEC, a
scheduled liberalization of trade flows has occurred. We have considered the same set of
environmental policies under the current trade arrangements and under free trade between EU
and CEEC. The calculations confirm other research, e.g. by Baldwin, Francois and Portes
(1997) or Gasiorek, Smith and Venables (1997), showing that large gains are in stake for the
CEECs while integration holds only modest efficiency gains for the EU member states.
Integration shows very slight impacts on environmental policies and marginal abatement
costs. The price of the carbon penalty is almost unchanged. However, integration mitigates to
a large extent the welfare losses caused by environmental policy. Under domestic carbon
abatement policies, the EU energy intensive industry lose competitiveness and accordingly,
energy intensive production rises in CEA and falls in EUR. This comparative advantage
disappears with lower carbon prices under Annex-B trading and global trading. Carbon
leakage rates mimic the effects of carbon abatement policies on energy intensive production.
As expected, emission trading provides substantial benefits mainly to the main seller of
permits i.e. the former Soviet Union and the central and eastern European associates. Those
regions also benefit from further trade liberalization. On the other hand the welfare losses of
the EU under the trading regimes are very small. Trade liberalization even offsets part of it.

There are several issues constituting the need for further research and model
improvement. Starting from the development of the suitable and detailed database covering

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