CO2 Emissions Embodied in International Trade and Economic Growth: Empirical Evidence for OECD and Non-OECD Countries

This study examined the relationship between CO2 emissions embodied in international trade and economic growth for OECD and non-OECD countries between 2005 and 2015. Unlike the traditional environmental Kuznets curve (EKC) hypothesis, which does not account for trade patterns, CO2 emissions embodied in trade balances were adopted in several models. To analyze the panel series, this study utilized econometric procedures: panel regression, the panel unit root test, the panel cointegration test, and panel Granger causality. To investigate evidence supporting the pollution haven hypothesis (PHH), this study constructed an equation including CO2 emissions embodied in net exports as a proportion of consumption. The results from the panel regression model validated the EKC hypothesis, even considering the CO2 emissions embodied in trade. Results of the panel unit root, panel cointegration, and Granger causality tests showed that CO2 emissions embodied in trade and economic growth have bi-directional Granger causality. This study provided evidence for the PHH, although some upper countries of net exporters or net importers for CO2 emissions can be observed. This study highlighted the need to intensify international cooperation to decrease environmental pollutants in both developed and developing countries, and considered the importance of CO2 emissions embodied in trade by expanding globalization.