A Study on the Relationship of Korea’s CO2 Emissions, Economic Growth, and Trade Dependence Using Quantile Regression Analysis

Abstract

Purpose This study aims to investigate the relationship of CO2 emissions, economic growth, and trade dependency in South Korea from 1971 to 2015. Design/Methodology/Approach This study utilized the traditional environmental Kuznets curve(EKC) hypothesis, which included the relationship between income per capita and CO2 emissions. To apply this hypothesis, econometric procedures were adopted by ordinary least squares(OLS) and quantile regression with respect to linear and non-linear models, and Granger causality was utilized to analyze the relationship of the CO2 emission-economic growth-trade dependency nexus. Findings First, the results of OLS analysis indicated that economic growth and energy consumption led to an increase in CO2 emissions, and the relationship between CO2 emissions and economic growth/trade dependency/export dependency have an inverted U-shape. Second, the quantile regression results showed that the relationship between CO2 emissions and trade dependency/import dependency are the N-shaped within the low level of CO2 emission distributions. Finally, economic growth, trade dependency, energy consumption, and import dependency were Granger caused by CO2 emissions. Research Implications Preceding an carbon zero policy, we need to consider that there are important aspects in CO2 emission reductions, as well as the role of economic growth and trade. In addition, environmental policies need to implement integrated policies in a dimension that does not urge economic prosperity, and ensure good environmental conditions and sustainability at the same time.