LAUSR

The Kyoto Protocol has received much criticism for its effectiveness as well as the spillover effect (i.e. carbon leakage and competitiveness loss). This paper provides the first evidence for the effect of the Kyoto Protocol on the bilateral trade in environmental goods, which can mitigate and prevent environmental damage. Using the generalized synthetic control method, I construct the counterfactual of trading pairs with Kyoto commitment and show that the export of environment goods by Kyoto countries increases by 31%-32% after the Protocol enters into force. The results suggest that the ratification of the Protocol could be a source of comparative advantage on environmental good production.