The Impact of Trade Openness on Carbon Emissions: Empirical Evidence from Emerging Countries

Emerging countries are the main source of new CO2 emissions and the major net carbon importers, and they have also become an important part of the global trade pattern. In this study, the impact of trade openness on CO2 emissions was investigated by approaches such as fully modified least squares (FMOLS), dynamic ordinary least squares (DOLS), and pooled mean group-autoregressive distributive lag (PMG-ARDL) methods. Further estimations were conducted by employing methods such as DCCEMG (dynamic common-correlated effect mean group) and Driscoll-Kray to strengthen the robustness of the results. Moreover, the Granger causality between trade openness and CO2 emissions was tested by using the Dumitrescu-Hurlin method. Conclusions can be drawn as follows: First, economic growth, energy consumption, trade openness, and CO2 emissions are all interconnected in the long term. Specifically, higher levels of economic growth and trade openness are associated with lower CO2 emissions, whereas energy consumption contributes to higher emissions. However, in the short term, economic growth and energy consumption lead to an increase in CO2 emissions, while trade openness does not have a significant impact. Moreover, there is a two-way Granger causality between trade openness and CO2 emissions. Additionally, economic growth and energy consumption have an indirect effect on CO2 emissions by influencing trade openness. Given these findings, emerging market countries should focus on enhancing their service sectors, promoting technological advancements, and fostering international collaboration in green technologies. By actively engaging in efforts to combat climate change, these countries reach a point where trade expansion and carbon reduction are achieved.