Effects of trade liberalization on the global decoupling and decomposition of CO2 emissions from economic growth

Abstract

Evidence of climate change is widespread and severe across all parts of the world. This poses a threat to humanity, and the entire environment. Appropriate policies are therefore required to help reduce greenhouse gas emission levels, limit the rate of global warming and its impact on climate change while pursuing national growth targets. This study employs the Tapio decoupling method to analyse the decoupling relationship (DR) between economic growth and carbon dioxide (CO2) emissions from 1998 to 2018. We also apply the Logarithmic Mean Divisia Index (LMDI) decomposition method on an extended Kaya identity to analyse CO2 emissions drivers in 145 countries. Last, the study examined the relative impacts of trade intensity and trade efficiency on the DR between economic growth and CO2 emissions. The results revealed that regions with relatively many developing and emerging countries (i.e., SSA, EAP, LAC, MENA, and SA) generally performed Weak Decoupling (WD), Expansive Negative Decoupling (END) and Expansive Coupling (EC), and the decoupling process was largely unstable. The ECA and NA regions on the other hand, which are typically composed of developed economies performed stable WD and Strong Decoupling (SD) statuses throughout the study period. The evidence further revealed that while trade intensity, activity, population, output per carbon emission and Carbon Intensity (CI) effects promote CO2 emissions, trade efficiency and energy intensity (EI) hinder emissions. We recommend that developing countries should enforce laws and cooperate with the developed economies to gain access to green technology to promote environmental sustainability.