Emissions and trade in Southeast and East Asian countries: a panel co-integration analysis

Abstract

Purpose

The purpose of this paper is to analyse the implication of trade on carbon emissions in a panel of eight highly trading Southeast and East Asian countries, namely, China, Indonesia, South Korea, Malaysia, Hong Kong, The Philippines, Singapore and Thailand.

Design/methodology/approach

The analysis relies on the standard quadratic environmental Kuznets curve (EKC) extended to include energy consumption and international trade. A battery of panel unit root and co-integration tests is applied to establish the variables’ stochastic properties and their long-run relations. Then, the specified EKC is estimated using the panel dynamic ordinary least square (OLS) estimation technique.

Findings

The panel co-integration statistics verifies the validity of the extended EKC for the countries under study. Estimation of the long-run EKC via the dynamic OLS estimation method reveals the environmentally degrading effects of trade in these countries, especially in ASEAN and plus South Korea and Hong Kong.

Practical implications

These countries are heavily dependent on trade for their development processes, and as such, their impacts on CO₂ emissions would be highly relevant for assessing their trade policies, along the line of the gain-from-trade hypothesis, the race-to-the-bottom hypothesis and the pollution-safe-haven hypothesis.

Originality/value

The analysis adds to existing literature by focusing on the highly trading nations of Southeast and East Asian countries. The results suggest that reassessment of trade policies in these countries is much needed and it must go beyond the sole pursuit of economic development via trade.

Citation

Ibrahim, M.H. and Rizvi, S.A.R. (2015), "Emissions and trade in Southeast and East Asian countries: a panel co-integration analysis", International Journal of Climate Change Strategies and Management, Vol. 7 No. 4, pp. 460-475. https://doi.org/10.1108/IJCCSM-11-2013-0131