This paper examines both economic and environmental impacts of the two new free trade agreements (FTAs) that Australia has recently negotiated with Japan and South Korea using the GTAP-E general equilibrium model. We analyse two trade policy scenarios: first a ‘Free trade scenario’ where bilateral tariffs are eliminated between Australia and Japan, and Australia and South Korea; second a ‘Green trade scenario’ where the ‘Free trade scenario’ is complemented by an environmental policy using an emissions trading scheme (ETS). The results indicate that two trade agreements enhance Australia’s trade at a modest expense on the environment. The paper illustrates that an ETS between Australia, Japan and Korea is an expensive policy to mitigate emissions arising from FTAs.


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