Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Based on 'Pollution Heaven Hypothesis', the introduction of more stringent environmental regulations has been traditionally seen as potentially harmful for exports as it leads to higher costs faced by firms. By applying this to greenhouse gas emissions, the more stringent environmental regulations for air pollution lead to the reduction of greenhouse gas. In the context of pollution haven hypothesis, this study investigates the impact of the reduction of both exporter(Korea) and importers' greenhouse gas on Korea's export flows in dirty industry by estimating the gravity equation. This study uses the data which cover 11 years from 1996 to 2006. The estimation result shows that : (1) our results are partly consistent with pollution haven hypothesis, (2) one percent reduction of the industry size- adjusted greenhouse gas leads to the decline of Korea's export flows in the range between 0.4084% and 2.1032% in dirty industries.