The causal nexus between trade openness and environmental pollution in selected emerging economies

Abstract

To avert the disruption of the Earth’s ecosphere, global carbon stock reduction must be embarked upon with all solemnity. Emissions-induced climate pattern would reduce the comparative advantage of critical sectors in emerging economies like agronomy sector, adventure industry, forest sector and fishery’s sector, thus altering the structure of trade openness. The influence of trade on global carbon stock is at a precarious stage. In this way, our study spread out the frontiers of current empirical study on the link between pollution and trade by further disaggregating international trade into trade import and export of merchandise in some emerging economies between 1971 and 2013, using Driscoll-Kraay error’s regression in pooled OLS to determine long run coefficients. Empirical results suggest that 1% rise in imports, energy usage and industrialization cause’s upsurge emissions by 0.471%, 1.176% and 0.596% respectively while 1% increase of economic progress causes a huge drop of emissions by as much as 1.153%. However, it was found that exports and urbanization increase improve emerging economy’s environment but it is statistically not significant. The path of causation between variables was examined using Dumitrescu-Hurlin causality test. Potentially, emerging economies should minimize or control imports to reduce impact on environment. This will ensure that international trade benefits the environment, boosts economic growth, protects environment and generates additional income to mitigate ecological pollution. Emerging economies should increase awareness on how to protect environment and offer a reduction of the carbon tax to green industries.