Impact of Trade Liberalization on the Environment of Iran

Trade liberalization would affect environmental quality through its effect on production. Following trade liberalization, international capital mobility is increased. According to Pollution Haven Hypothesis (PHH) the polluted industries will transfer from countries with high environmental policies to moderate environmental policies. This study is concerned with the impact of trade openness on pollution and resource depletion in Iran. Two models have been applied in this study.The first model is for pollution and the second one is for natural resource depletion. The results indicate that pollution is negatively related to trade intensity, capital to labor ratio and real GDP per square kilometer, while GNP per square kilometer is positively related to pollution. In addition,evidence suggests that trade intensity, real GDPper square kilometer are negatively related to environmental degradation and GNP and capital labor ratio are positively related. So the technique,scale, and total effects of liberalization are not detrimental to the environment. The composition effect of trade liberalization on natural resource utilization, on the other hand, is beneficial in second model. However, this outcome indicates that the effects of trade liberalization in Iran could not cause the pollution resulted from greenhouse gases and the destruction of the environment.