Trade and the Environment: New Methods, Measurements, and Results

We review recent research linking international trade to the environment, with a focus on new results and methods. The review is given structure by a novel decomposition linking changes in emissions to changes in productive activity at the plant, firm, industry, and national levels. Although some new results have emerged from the application of a Melitz-style approach to trade and the environment, the full potential of this approach has not yet been realized. We discuss existing empirical and theoretical work, introduce three new hypotheses, and suggest paths for future researchers to follow.