The Role of Trade Liberalization in Carbon Dioxide Emission: Evidence From Heterogeneous Panel Estimations

Abstract

In the present globalized world, production forms are progressively divided across nations. Consequently, domestic consumption in one nation is progressively fulfilled by worldwide supply chains. This spectacle has pulled policy and widespread intellectual discussions on the assignment of greenhouse gas (GHG) emanations, especially carbon dioxide (CO2) emission; these are accountabilities connected to global trade since worldwide trade causes net carbon dioxide emission. The aim of the present study is to examine the impact of trade liberalization on carbon dioxide emission. We used the panel data of 105 developed and developing countries from 1990 to 2017. The results of FMOLS and DOLS confirm that all variables are connected in the long-run period. The results of long run coefficient confirm that that the trade liberalization has a positive effect on environmental degradation and cause to increase environmental degradation. Likewise, economic growth and energy consumption has also a positive and significant impact on environmental degradation. However, we find an evidence of negative and significant impact of renewable energy utilization on environmental degradation. Finally, the results of heterogeneous panel causality confirm that there is a uni-directional causal relationship between trade liberalization and environmental degradation where causality is running from trade liberalization to environmental degradation. However, we find a bi-directional causal relationship of environmental degradation with energy utilization and renewable energy utilization in all selected developed and developing countries.