Trade protectionism jeopardizes carbon neutrality – Decoupling and breakpoints roles of trade openness

Abstract

This study aims to investigate the decoupling impact of trade on carbon emissions and under what circumstances trade would contribute to decoupling carbon emissions. A combination of Tapio decoupling model and structural threshold model is developed to study and quantify the impact. The empirical study uses panel data for 124 countries around the world from 2000 to 2018. The results show that the main state of the relationship between trade openness, economic growth and carbon emissions was weak decoupling. Moreover, there are two breakpoints in the impact of trade openness on carbon emissions; once the structural breakpoints are exceeded, trade development inhibits carbon emissions and contributes to global carbon neutrality, which opposes the claims of trade protectionists. At the sub-regional level, trade openness favors carbon neutrality in rich countries, but not in poor countries. Thus, achieving carbon neutrality requires free trade, and fairer free trade needs to benefit countries of different income groups.