An asymmetric analysis of the role of exports and imports in consumption-based carbon emissions in the G7 economies: evidence from nonlinear panel autoregressive distributed lag model.

Abstract

A genuine concern faced by the present world is global warming. Millions of human and animal lives are at risk due to global warming. Therefore, the subject has gained enormous attention from research and academia around the world. Literature shows that the primary cause of global climate change or global warming is carbon (CO2) emissions. Hence, the role of a reliable carbon emission measurement is important for devising a relevant climate policy to deal with environmental problems. Based on trade-adjusted statistics of carbon emissions, a relevant climate policy response can be provided. Unlike the previous studies, this study examines the asymmetric impact of international trade on consumption-based carbon emissions from 1990 to 2017 in the G7 economies. To get empirical estimates, the study applies second-generation co-integration technique and nonlinear panel autoregressive distributive lag (NPARDL) model for estimating the relevant coefficients. The empirical results show that positive growth of exports significantly decreases consumption-based carbon emissions both in the short and long run, whereas the impact of negative growth of exports is insignificant. For imports, the results show that, over time, positive growth of imports significantly increases consumption-based carbon emissions in the long run, while the impact of negative growth of imports is insignificant. Finally, it is recommended for the policymakers to target the export industries for relevant policy interventions, which are less polluting and can generate other economic benefits as well.