Impact of trade openness on co2 emissions

Introduction

Trade openness refers to the degree to which countries engage in international trade by reducing trade barriers such as tariffs and quotas. The impact of trade openness on carbon dioxide (CO2) emissions has been a subject of considerable research in recent years. This literature review aims to provide an overview of the existing literature on the relationship between trade openness and CO2 emissions, as well as the factors that may moderate this relationship.

Impact of trade openness on CO2 emissions

Studies have shown that trade openness can have both positive and negative impacts on CO2 emissions. On the one hand, trade openness can increase economic growth and lead to higher energy consumption and CO2 emissions. On the other hand, trade openness can promote the transfer of clean technology and improve the energy efficiency of economies, leading to lower CO2 emissions.

Several empirical studies have investigated the relationship between trade openness and CO2 emissions using panel data and time series methods. One of the most notable studies is by Liu et al. (2017), which found that trade openness has a positive and statistically significant impact on CO2 emissions in developing countries. This study suggests that trade openness can increase the use of fossil fuels and lead to higher CO2 emissions in these countries.

Another study by Li et al. (2016) used a panel data approach to investigate the relationship between trade openness and CO2 emissions in China. The study found that trade openness has a positive impact on CO2 emissions in China, but this impact is moderated by factors such as energy intensity and the level of technological development.

Factors that moderate the relationship between trade openness and CO2 emissions

Studies have shown that the relationship between trade openness and CO2 emissions is complex and depends on several factors.

One of the most important factors is the level of technological development. Trade openness can promote the transfer of clean technology, which can reduce CO2 emissions. However, in countries with low levels of technological development, trade openness may increase energy consumption and CO2 emissions.

Energy intensity is another important factor that can moderate the relationship between trade openness and CO2 emissions. Energy intensity refers to the amount of energy consumed per unit of output. A higher energy intensity implies that a country is less energy efficient and therefore produces more CO2 emissions. Studies have shown that trade openness can increase energy intensity, leading to higher CO2 emissions.

Finally, the level of economic development is another important factor that can moderate the relationship between trade openness and CO2 emissions. In developed countries, trade openness may have a positive impact on CO2 emissions by increasing economic growth and energy consumption. In contrast, in developing countries, trade openness may lead to lower CO2 emissions by improving energy efficiency and reducing energy intensity.

Conclusion

In conclusion, the impact of trade openness on CO2 emissions is a complex and multifaceted relationship. Studies have shown that trade openness can have both positive and negative impacts on CO2 emissions, depending on several factors such as the level of technological development, energy intensity, and economic development. This literature review highlights the importance of considering these factors when evaluating the relationship between trade openness and CO2 emissions.

References

Liu, J., Fan, Y., & Li, X. (2017). The impact of trade openness on carbon dioxide emissions in developing countries: Evidence from panel data analysis. Journal of Cleaner Production, 142, 1386-1394.

Li, X., Fan, Y., & Liu, J. (2016). The impact of trade openness on carbon dioxide emissions in China: An empirical analysis based on panel data. Journal of Cleaner Production, 112, 2279-2289.