The asymmetric effect of agriculturalization toward climate neutrality targets

Abstract

Agricultural activities immensely contribute to greenhouse gas emissions (GHGs). This study investigates the heterogeneous effect of agricultural production (AGRIP) on three major GHGs emissions, i.e., carbon dioxide (CO2), nitrous oxide (N2O), and methane (CH4) under the Environmental Kuznets Curve (EKC) framework using a balanced panel data of 90 countries from the period 1991 to 2019. Second-generation panel unit root and cointegration tests are conducted to account for cross-sectional dependence. The findings suggest that there is a long run equilibrium among target variables. Evidence from panel quantile regression suggests that AGRIP significantly reduced CO2 emissions, and the effect is stronger in lower quantiles (least carbon emitters). On the other hand, AGRIP increases N2O and CH4 emissions in all quantiles. However, AGRIP is homogeneously distributed across N2O quantiles while the effect is stronger in higher quantiles (high methane emitters) in the case of CH4 model. Concerning agricultural trade, exports impede CO2 emissions but increase N2O and methane emissions. Agricultural imports are positively associated with all GHGs emissions. The effect of agricultural trade is largely heterogeneous and varies across different quantile levels of GHGs emissions. The EKC is fully valid for CO2 and N2O but not for the methane emissions model. Based on the results, it is suggested that high GHGs emitter should shift their agricultural activities from traditional to sustainable approaches along with green trade policies to achieve climate neutrality targets.