Could trade protectionism reshape the nexus of energy-economy-environment? Insight from different income groups

Abstract

The Russian-Ukrainian conflict and the COVID-19 pandemic have triggered trade protectionism, which further accelerates the US isolationism and European populism. This study examines the impacts of trade protection on renewable energy, economic growth, and carbon emissions. Compared to previous studies, the role of trade openness is innovatively examined and heterogeneity is analyzed for different income groups. ssioThis study analyzes the impact of trade openness on the energy-economy-environment (3E) system of 123 countries through threshold effects using a panel threshold regression (PTR) model. The results show that there is a trade openness threshold for the impact of renewable energy consumption and economic growth, and then there is an inverse effect. That is, a U-shaped relationship exists between renewable energy and economic growth with the threshold effect of trade openness. While for the nexus of renewable energy and carbon emissions, there are two structural breakpoints. The inhibiting effect of renewable energy consumption on carbon emissions decreases as trade openness crosses the breakpoint. However, the effects of structural breakpoints in trade openness vary across income economies. Specifically, as trade openness has passed the structural breakpoint, renewable energy's role in promoting the economy in the middle- and high-income groups has gradually increased, while that in the low-income groups has fallen. The study recommends effective trade measures to minimize environmental damage and promote sustainable growth through the use of clean energy.