Trade Openness and Carbon Emissions: Evidence from Belt and Road Countries

Abstract

The search for a green and low-carbon economy has been a guide to current energy and environmental research. Using current panel cointegration approaches, our study examines the interaction between trade and an environmental pollution proxy of carbon dioxide (CO2) emissions by integrating economic growth and energy usage as major potential determining factors in this relationship for 49 high-emission countries in Belt and Road regions over the period of 1991–2014. For a robust analysis, we further grouped these countries into income panels (high, middle, low) and various regions (East Asia, Southeast Asia, Central Asia, South Asia, the Middle East/Africa, and Europe). The results of the panel cointegration tests revealed that the four variables were stationary in the long run. Similarly, our panel results indicated that trade openness had both positive and negative impacts on environmental pollution, but the effect varied in these different groups of nations. The results of the vector error correction model (VECM) causality also showed a long-run causal effect between trade, economic growth, energy consumption, and environmental pollution in the Belt and Road, Europe, high-income, middle-income, and low-income panels. The environmental Kuznets curve (EKC) results further indicated the existence of an inverted U-form relationship between trade and carbon emissions. Finally, certain policy implications are discussed.