Does trade openness affects global carbon dioxide emissions: Evidence from the top CO₂ emitters

Abstract

Purpose

The purpose of this paper is to analyze the effect of economic growth, international trade and energy consumption on the global carbon dioxide (CO₂) emissions, in the case of top CO₂ emitters, namely, USA, Japan, Canada, Iran, Saudi Arabia, UK, Australia, Italy, France and Spain using the annual data from 1971 to 2013.

Design/methodology/approach

For this purpose, the time series, data technique is applied. Unit root test with structural break and the bounds testing approach for cointegration in the presence of structural break is tested. Finally, a vector error correction model for the Granger causality test is applied to detect the direction of causality. The authors have used the techniques that will help in examining the structural break in the time series data.

Findings

The results reveal that their exists a long-run relationship between CO₂ emissions and its determinants in the USA, Canada, Iran, Saudi Arabia, the UK, Australia, Italy, France and Spain, energy consumption is the main determinant of carbon dioxide (CO₂) emissions in the long run and for direction of causality, the authors found bidirectional causality in the long run between energy consumption and CO₂ emissions in the USA, Canada, Iran, Saudi Arabia and the UK, and Granger causality running in opposite direction in the case of Australia from CO₂ emissions to energy consumption was analyzed. In terms of growth-trade-pollution nexus (USA, Canada, Iran and France) hold one-way causality running from economic growth and trade openness to CO₂ emissions (IV) the environmental Kuznets curve hypothesis is validated only for the USA. Robust policy implications can be derived from this study. First, without harming the economy, these countries can reduce the use of energy consumption for lower pollution. Second, the amount of trade should be decreased to lower the emissions because the authors find that an increase in trade does Granger cause to CO₂ emissions in the long run.

Originality/value

There has been no study that investigated the relationship between CO₂ emissions, real income, consumption of energy and international trade in the environmental Kuznets relation for the top CO₂ emitter’s countries over the period of 1971–2013. The authors did a comparative study of the empirical finding among these nations.

Citation

Ansari, M.A., Haider, S. and Khan, N.A. (2020), "Does trade openness affects global carbon dioxide emissions: Evidence from the top CO₂ emitters", Management of Environmental Quality, Vol. 31 No. 1, pp. 32-53. https://doi.org/10.1108/MEQ-12-2018-0205