Trade Openness and Environmental Degradation in Asean-5 Countries

Tham Yee Ling,Khairil-Annuar Mohd-Kamal,Rossazana Ab-Rahim

doi:10.6007/ijarbss/v10-i2/6958

Tham Yee Ling, Khairil-Annuar Mohd-Kamal + Show 1 more

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https://doi.org/10.6007/ijarbss/v10-i2/6958

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Abstract

This study investigates the relationship between trade openness and carbon dioxide (CO2) emissions among ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand) during the period from 1995 to 2014. The variables used are trade openness, carbon dioxide emissions, gross domestic product, energy consumption, and foreign direct investment. Methodologies applied in this study are Panel Unit Root test, Pedroni Co-integration test, and Panel Granger Causality. The results of this study show there is a long-run relationship between the variables in ASEAN-5 countries. The results further show there is a bidirectional causal relationship between carbon dioxide, economic growth, and energy consumption in the short-run. The results of this study imply that ASEAN policy makers should focus on the implementation of carbon tariff and promote the energy efficiency usage. Keywords: Environmental Degradation, Trade Openness, Cointegration, Granger Causality.

Highlights

Trade openness enables domestic industrial sector of a country to expand more rapidly as compared to a closed economy
This paper aims to examine the nexus between carbon dioxide emissions, trade openness, economic growth (GDP), energy consumption, and foreign direct investment (FDI) for ASEAN-5 countries
This study emphasizes on the relationship between trade openness and carbon dioxide emissions among ASEAN-5 countries

Summary

Introduction

Trade openness enables domestic industrial sector of a country to expand more rapidly as compared to a closed economy. Economic growth can be accelerated by trade openness with the agreement of trade among countries (Sulaiman & Abdul-Rahim, 2017). There are number of agreements on international trade among the countries about tariffs, imports and exports such as General Agreement on Tariffs and Trade (GATT) and World Trade Organisation (WTO). A bilateral and multilateral Free Trade Agreement (FTA) among countries can minimize the trade barrier in their economic relationship. Trade liberalization is good for economy in terms of prices, investments, productivities and so on. Trade openness causes policy of aggressive market entry, intricacy of the system of international trading, and structural unemployment (Drozdz & Miskinis, 2011)

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