The impact of intra-industry trade on carbon dioxide emissions: The case of the European Union

Abstract

The reductions of climate change and greenhouse gas emissions are an essential objective of the European Union (EU) to achieving the reduction target by 20% by 2020. Along with energy consumption and agriculture, trade has a diverse impact on climate change. International trade usually negatively affects the environment, while the influence of intra-industry trade is more favourable. The paper investigates the impact of energy use, agriculture, and intra-industry trade on environmental pollution in EU countries using panel data for the period 2000–2014. The research frames the theoretical hypothesis that describing the relationship between agricultural intra-industry trade and climate change. The assumptions are confirmed by panel fixed effects, and Generalized Method of Moment (GMM) estimations, and the panel cointegration test. The empirical results have supported by the literature, and all variables used in this study are stationary applying panel unit root test. Results show that agricultural intra-industry trade, renewable energy is negatively correlated with climate change, confirming the less pollutant hypothesis, while economic growth and agricultural productivity induce environmental problems. This study confirms the theoretical hypotheses explaining the effect of intra-industry trade for agricultural products as well as the impacts of renewable energy use, agricultural land productivity, and economic growth on CO2 emissions.