Re-estimating the trade openness–carbon emissions nexus: a global analysis considering nonlinear, mediation, and heterogeneous effects

Abstract

ABSTRACT The impact of trade openness on environment is of increasing concern to environmental practitioners, industrialists, and researchers. Unlike previous studies that only focus on the impact of trade openness on carbon dioxide (CO2) emissions, this study explores the relationship between trade openness and carbon productivity. To this end, we construct a dynamic nonlinear panel model using a panel sample of 76 countries for the period 1990–2021. Furthermore, we conduct a mediation effect analysis to examine the underlying impact mechanisms between trade openness and carbon productivity. Finally, by dividing the total sample into four subsamples, we analyse possible regional heterogeneity in trade openness and carbon productivity relationship. The empirical results show that: (1) Trade openness has a significant impact on carbon productivity, with a U-shaped relationship between the two variables. In other words, carbon productivity first declines and then rises after a certain threshold level of trade openness is reached. (2) Energy intensity and energy consumption structure are two important mediators between trade openness and carbon productivity. (3) The impact of trade openness on carbon productivity is heterogeneous across countries. Based on the main findings, we propose several policy implications to improve trade quality as well as global carbon productivity.