CO2 Emissions Embodied in International Trade and Economic Growth: Empirical Evidence for OECD and Non-OECD Countries

Hyunsoo Kang

doi:10.3390/su132112114

Abstract

This study examined the relationship between CO2 emissions embodied in international trade and economic growth for OECD and non-OECD countries between 2005 and 2015. Unlike the traditional environmental Kuznets curve (EKC) hypothesis, which does not account for trade patterns, CO2 emissions embodied in trade balances were adopted in several models. To analyze the panel series, this study utilized econometric procedures: panel regression, the panel unit root test, the panel cointegration test, and panel Granger causality. To investigate evidence supporting the pollution haven hypothesis (PHH), this study constructed an equation including CO2 emissions embodied in net exports as a proportion of consumption. The results from the panel regression model validated the EKC hypothesis, even considering the CO2 emissions embodied in trade. Results of the panel unit root, panel cointegration, and Granger causality tests showed that CO2 emissions embodied in trade and economic growth have bi-directional Granger causality. This study provided evidence for the PHH, although some upper countries of net exporters or net importers for CO2 emissions can be observed. This study highlighted the need to intensify international cooperation to decrease environmental pollutants in both developed and developing countries, and considered the importance of CO2 emissions embodied in trade by expanding globalization.

Highlights

Carbon dioxide emissions have crucially affected natural ecosystems and sustainable development throughout human history, but controversy remains regarding global climate change [1]
As mentioned in previous section, the main issue of this study is to investigate the relationship between CO2 emissions embodied in international trade and economic growth, and the balance of emissions embodied in trade (BEET) is a key factor that can be identified as direct and indirect channels of trade
Even if we consider the CO2 emissions embodied in international trade, we find that the early stage of economic growth increases the net export of CO2 emissions in trade, before declining with net exports after a threshold

Summary

Introduction

Carbon dioxide emissions have crucially affected natural ecosystems and sustainable development throughout human history, but controversy remains regarding global climate change [1]. While the Covid-19 pandemic has temporarily reduced emissions, carbon dioxide emission levels are still at record highs and rising. Under such conditions, the international community have begun to discuss carbon neutrality. Carbon neutrality can be achieved by balancing carbon dioxide emissions from human activities with global carbon dioxide absorption. For this purpose, we need to reduce greenhouse gases, and the substantial emissions must be reduced to zero by increasing the amount of absorption, such as through forest restoration, or removed using reduction technology

Objectives

Methods

Conclusion