Trade Openness and CO2 Emissions: The Heterogeneous and Mediating Effects for the Belt and Road Countries

Abstract

To investigate whether increasing trade openness results in more severe environmental problems, this study investigates the impact of trade openness on carbon dioxide (CO2) emissions using panel data from 64 countries along the Belt and Road from 2001–2019. Fully considering the potential heterogeneity, the panel quantile regression approach is utilized. Moreover, this study explores the three major mediating effects of the process, namely the energy-substitution effect, economic effect, and technology effect. The empirical results indicate that the improvement in trade openness has a significantly positive effect on CO2 emissions, and it also shows that the impact varies with different levels of CO2 emissions. Furthermore, the indirect effect of trade openness on CO2 emissions via the economic effect is positive, while the indirect effect via the energy-substitution and the technology effect is negative. Therefore, it is necessary to improve renewable energy consumption, decrease energy intensity, and formulate related policies to reduce carbon emissions policies in terms of local conditions.