Strict environmental policies reduce CO2 emissions in global trade, but cooperation is needed to curb carbon leakage.
This research looked at how strict environmental rules in one country might lead to more pollution in other countries due to production moving there. The study used data to see if stricter rules in one place make companies pollute more in other countries. The findings show that tough environmental laws generally help reduce CO2 emissions in traded goods and services worldwide. However, when importing from countries with the strictest environmental laws, there is still some pollution increase. This suggests that countries aiming for zero carbon emissions need to cooperate globally to tackle climate issues.