Abstract
The purpose of this study is to provide new evidence on the relationship between trade openness and carbon dioxide (CO2) emissions in Africa. Based on recent data and an uncommon and more informative composite indicator of trade openness proposed by Squalli and Wilson, we use an augmented Stochastic Impact by Regression on Population, Affluence and Technology (STIRPAT) model. The empirical evidence using the Two-Stage Least Square estimation (2SLS) validates the “pollution haven” hypothesis and shows that trade openness increases CO2 emissions in Africa. However, the elasticity varies greatly depending on the different measures of trade openness used. Moreover, we find that trade openness is associated with an increase in CO2 emissions in North Africa, South Africa and West Africa, but rather has a negative effect on CO2 emissions in East Africa and in Central Africa. Furthermore, the quantile regression approach shows that the effect of trade openness is increasing on the 10th, 25th, 50th, and 75th quintiles, but decreasing at the 90th quintile, thus highlighting the "scale effect". The results obtained are robust even when using other indicators of environmental quality. The findings suggest that it is important to have a real measure of the level of trade openness of countries, which will allow African leaders in particular to take appropriate measures to strengthen barriers to the entry of technologies and polluting materials, and invest more in green technologies.
Similar content being viewed by others
Notes
This refers to the measure of trade openness commonly used in the literature which is equal to the sum of a country's imports and exports relative to its GDP.
References
Acemoglu D, Johnson S, Robinson JA (2001) The colonial origins of comparative development: An empirical investigation. Am Econ Rev 91(5):1369–1401
Acheampong AO, Adams S, Boateng E (2019) Do globalization and renewable energy contribute to carbon emissions mitigation in Sub-Saharan Africa? Sci Total Environ 677:436–446
Acheampong, A. O., & Dzator, J. (2020). Managing Environmental Quality in Sub-Saharan Africa: Does Institutional Quality Matter. Handbook Environ Mater Manag, 215–1.
Acheampong AO, Dzator J, Savage DA (2021)Renewable energy, CO2 emissions and economic growth in sub-Saharan Africa: does institutional quality matter? J Polic Model 43(5):1070–1093
Adams S, Opoku EEO (2020) Trade and environmental pollution in Africa: accounting for consumption and territorial-based emissions. Environ Sci Pollut Res 27:44230–44239
Adams S, Kaffo Fotio H (2022) Economic integration and environmental quality: accounting for the roles of financial development, industrialization, urbanization and renewable energy. J Environ Plan Managt 67:688–713
Adebayo TS, Kirikkaleli D, Adeshola I, Oluwajana D, Akinsola GD, Osemeahon OS (2021) Coal consumption and environmental sustainability in South Africa: the role of financial development and globalization. Int J Renew Energy Dev 10(3):527–536
Alesina A, Devleeschauwer A, Easterly W, Kurlat S, Wacziarg R (2003) Fractionalization. J Econ Growth 8:155–194
Aitken AC (1936) IV. On least squares and linear combination of observations. Proc R Soc Edinb 55:42–48
Alfalih AA, Hadj TB (2022) Financialization, natural resources rents and environmental sustainability dynamics in Saudi Arabia under high and low regimes. Resour Policy 76:102593
Álvarez-Díaz M, Caballero-Miguez G, Solino M (2011) The institutional determinants of CO2 emissions: a computational modeling approach using artificial neural networks and genetic programming. Environmetrics 22(1):42–49
Antweiler W, Copeland BR, Taylor MS (2001) Is free trade good for the environment? American Economic Review 91(1):877–908
Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297
Avom D, Nkengfack H, Fotio HK, Totouom A (2020) ICT and environmental quality in Sub-Saharan Africa: Effects and transmission channels. Technol Forecast Soc Chang 155:120028
Awad A (2019) Does economic integration damage or benefit the environment? Africa’s experience. Energy Policy 132:991–999
Baum CF, Schaffer ME, Stillman S (2003) Instrumental variables and GMM: estimation and testing. Stand Genomic Sci 3(1):1–31
Baum CF, Schaffer ME, Stillman S (2007) Enhanced routines for instrumental variables/generalized method of moments estimation and testing. Stand Genomic Sci 7(4):465–506
Baumol WJ, Oates WE (1971) The use of standards and prices for protection of the environment. In: Bohm P, Kneese AV (eds) The economics of environment. Palgrave Macmillan, London
Binder M, Coad A (2011) From Average joe’s happiness to miserable jane and cheerful john: using quantile regressions to analyze the full subjective well-being distribution. J Econ Behav Organ 79(3):275–290
Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econom 87(1):115–143
Bond, P. (2014). Climate justice in, by, and for Africa. Routledge handbook of the climate change movement, 205–221.
Busby JW, Cook KH, Vizy EK, Smith TG, Bekalo M (2014) Identifying hot spots of security vulnerability associated with climate change in Africa. Clim Change 124:717–731
Bussière M, Callegari G, Ghironi F, Sestieri G, Yamano N (2013) Estimating trade elasticities: demand composition and the trade collapse of 2008–2009. Am Econ J Macroecon 5(3):118–151
Cade BS, Noon BR (2003) A gentle introduction to quantile regression for ecologists. Front Ecol Environ 1(8):412–420
Chang C-P, Wen J, M. Dong et Y. Hao. (2018) Does government ideology affect environmental pollutions? New evidence from instrumental variable quantile regression estimations. Energy Policy 113:386–400
Chen F, Jiang G, Kitila GM (2021) Trade openness and CO2 emissions: the heterogeneous and mediating effects for the belt and road countries. Sustainability 13(4):1958
Chen Z, Paudel KP, Zheng R (2022) Pollution halo or pollution haven: assessing the role of foreign direct investment on energy conservation and emission reduction. J Environ Planning Manage 65(2):311–336
Chen X, Liu B, Tawiah V, Zakari A (2023) Greening African economy: the role of Chinese investment and trade. Sustain Dev. https://doi.org/10.1002/sd.2713
Cherniwchan J, Copeland BR, Taylor MS (2017) Trade and the environment: new methods, measurements, and results. Ann Rev Econ 9:59–85
Chernozhukov V, Hansen C (2008) Instrumental variable quantile regression: a robust inference approach. J Econom 142(1):379–398
Copeland BR (2013) Trade and the environment. Palgrave Macmillan, London, pp 423–496
Copeland BR, Taylor MS (2004) Trade, growth, and the environment. J Econ Literature 42(1):7–71
Cragg JG, Donald SG (1993) Testing identifiability and specification in instrumental variable models. Economet Theor 9(2):222–240
Crozet, M., Emlinger, C., & Jean, S. (2015). On the gravity of the trade slowdown. The global trade slowdown: a new normal? VoxEU and CEPR, p 333
Dauda L, Long X, Mensah CN, Salman M, Boamah KB, Ampon-Wireko S, Dogbe CSK (2021) Innovation, trade openness and CO2 emissions in selected countries in Africa. J Clean Prod 281:125143
Dietz T, Rosa EA (1997) Effects of population and affluence on CO2 emissions. Proc Natl Acad Sci 94(1):175–179
Djeufack Dongmo A, Mbengono Coralie P, Chetue Komguep M, Kembeng Tchinda U (2023) Urbanization, informal economy, economic growth and CO2 emissions in African countries: a panel vector autoregression (PVAR) model approach. J Bioecon 25(1):35–63
Driscoll JC, Kraay AC (1998) Consistent covariance matrix estimation with spatially dependent panel data. Rev Econ Stat 80(4):549–560
Ehrlich PR, Holdren JP (1971) Impact of population growth: complacency concerning this component of man’s predicament is unjustified and counterproductive. Science 171(3977):1212–1217
Ertugrul HM, Cetin M, Seker F, Dogan E (2016) The impact of trade openness on global carbon dioxide emissions: Evidence from the top ten emitters among developing countries. Ecol Ind 67:543–555
Fonta WM, Ayuk ET, van Huysen T (2018) Africa and the green climate fund: current challenges and future opportunities. Climate Policy 18(9):1210–1225
Frankel J, Rose A (2002) An estimate of the effect of common currencies on trade and income. Q J Econ 117(2):437–466
Frankel JA, Rose AK (2005) Is trade good or bad for the environment? Sorting out the causality. Rev Econ Stat 87(1):85–91
Gandjon Fankem GS, Feyom C (2023) Is trade openness a barrier to industrialization? Evidence from Sub-Saharan Africa. Rev World Econ. https://doi.org/10.1007/s10290-023-00497-2
Gantman ER, Dabós MP (2017) International trade and factor productivity as determinants of the real effective exchange rate. Appl Econ Lett 25(5):331–334
Glanemann N, Willner SN, Levermann A (2020) Paris climate agreement passes the cost-benefit test. Nat Commun 11(1):110
Gozgor G (2017) Does trade matter for carbon emissions in OECD countries? Evidence from a new trade openness measure. Environ Sci Pollut Res 24(36):27813–27821
Gräbner C, Heimberger P, Kapeller J, Springholz F (2021) Understanding economic openness: a review of existing measures. Rev World Econ 157:87–120
Grossman GM, Krueger AB (1993) Environmental impacts of a North American free trade agreement. MIT Press, Cambridge
Grossman GM, Krueger AB (1995) Economic growth and the environment. Q J Econ 110(2):353–377
Grubb M, Edmonds J, Ten Brink P, Morrison M (1993) The costs of limiting fossil-fuel CO2 emissions: a survey and analysis. Annu Rev Energy Env 18(1):397–478
Hansen LP (1982) Large sample properties of generalized method of moments estimators. Econom: J Econom Soc 50:1029–1054
Harding M, Lamarche C (2009) A quantile regression approach for estimating panel data models using instrumental variables. Econ Lett 104(3):133–135
Ho SY, Iyke BN (2019) Trade openness and carbon emissions: evidence from central and eastern European countries. Rev Econ 70(1):41–67
Hoechle D (2007) Robust standard errors for panel regressions with cross-sectional dependence. Stata J 7(3):281–312
Hogan WW, Jorgenson DW (1991) Productivity trends and the cost of reducing CO2 emissions. Energy J 12(1):67–86
Hossain MS (2011) Panel estimation for CO2 emissions, energy consumption, economic growth, trade openness and urbanization of newly industrialized countries. Energy Policy 39(11):6991–6999
IEA (2019). International energy agency. Africa energy outlook 2019, Special report. https://www.iea.org/reports/africa-energy-outlook-2019
Jean, S. (2015). Le ralentissement du commerce mondial annonce un changement de tendance. La lettre du CEPII, (356). Available at: http://www.cepii.fr/PDF_PUB/lettre/2015/let356.pdf
Kahuthu A (2006) Economic growth and environmental degradation in a global context. Environ Dev Sustain 8(1):55–68
Kamguia B, Tadadjeu S, Miamo C, Njangang H (2022) Does foreign aid impede economic complexity in developing countries? Int Econ 169:71–88
Kaplan DM, Sun Y (2017) Smoothed estimating equations for instrumental variables quantile regression. Economet Theor 33(1):105–157
Khan Z, Ali S, Umar M, Kirikkaleli D, Jiao Z (2020) Consumption-based carbon emissions and international trade in G7 countries: the role of environmental innovation and renewable energy. Sci Total Environ 730:138945
Kleibergen F, Paap R (2006) Generalized reduced rank tests using the singular value decomposition. J Econom 133(1):97–126
Koehrsen J (2015) Does religion promote environmental sustainability? Exploring the role of religion in local energy transitions. Soc Compass 62(3):296–310
Koenker R (1981) A note on studentizing a test for heteroscedasticity. J Econom 17(1):107–112
Koenker R, Bassett G Jr (1978) Quantile regression. Econom: J Econom Soc 23:33–50
Köppl A, Schratzenstaller M (2022) Carbon taxation: a review of the empirical literature. J Econ Surv 37:1353–1388
Lewbel A (2012) Using heteroscedasticity to identify and estimate mismeasured and endogenous regressor models. Journal of Business & Economic Statistics 30(1):67–80
Li B, Haneklaus N (2022) The role of clean energy, fossil fuel consumption and trade openness for carbon neutrality in China. Energy Rep 8:1090–1098
Lindmark M (2002) An EKC-pattern in historical perspective: carbon dioxide emissions, technology, fuel prices and growth in Sweden 1870–1997. Ecol Econ 42(1–2):333–347
Liu F, Tawiah V, Zakari A, Alessa N (2023) The impact of climate disaster on international trade: evidence from developed and developing countries. J Environ Manage 342:118308
Machado JA, Silva JS (2019) Quantiles via moments. J Econom 213(1):145–173
Mahmood H, Alkhateeb TTY, Furqan M (2020) Exports, imports, foreign direct investment and CO2 emissions in North Africa: spatial analysis. Energy Rep 6:2403–2409
Managi S, Hibiki A, Tsurumi T (2009) Does trade openness improve environmental quality? J Environ Econ Manag 58(3):346–363
Martínez-Zarzoso I, Maruotti A (2011) The impact of urbanization on CO2 emissions: evidence from developing countries. Ecol Econ 70(7):1344–1353
Mignamissi D, Djeufack A (2022) Urbanization and CO2 emissions intensity in Africa. J Environ Planning Manage 65(9):1660–1684
Mignamissi D, Nguekeng B (2022) Trade openness-industrialization nexus revisited in Africa. Econ Chang and Restr 55:2547–2575
Ngounou BA, Tekam Oumbe H, Ongo Nkoa BE, Noubissi Domguia E (2023) Inclusive growth in the face of increasing urbanization: what experience for African countries? Rev Dev Econ 28:34–70
Nurgazina Z, Ullah A, Ali U, Koondhar MA, Lu Q (2021) The impact of economic growth, energy consumption, trade openness, and financial development on carbon emissions: empirical evidence from Malaysia. Environ Sci Poll Res 28(42):60195–60208
Opoku-Mensah E, Yin Y, Oppong A, Darko PA, Sai R, Tuffour P (2021) African continental free trade area treaty and CO2: a volatility-driven CO2 mitigation pathways model for ratified countries. J Clean Prod 328:129570
Overland I, Fossum Sagbakken H, Isataeva A, Kolodzinskaia G, Simpson NP, Trisos C, Vakulchuk R (2022) Funding flows for climate change research on Africa: where do they come from and where do they go? Climate Dev 14(8):705–724
Pata UK, Caglar AE (2021) Investigating the EKC hypothesis with renewable energy consumption, human capital, globalization and trade openness for China: evidence from augmented ARDL approach with a structural break. Energy 216:119220
Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Available at SSRN 572504
Poumanyvong P, Kaneko S (2010) Does urbanization lead to less energy use and lower CO2 emissions? Cross-Country Anal Ecolog Econ 70(2):434–444
Ricardo D (1817) On the principles of political economy and taxation. J. Murray, London
Roodman D (2009a) How to do xtabond2: an introduction to difference and system GMM in stata. Stand Genomic Sci 9(1):86–136
Roodman D (2009b) A note on the theme of too many instruments. Oxford Bull Econ Stat 71(1):135–158
Royston P (1992) Approximating the Shapiro-Wilk W-test for non-normality. Stat Comput 2:117–119
Saadi M (2020) Remittance inflows and export complexity: new evidence from developing and emerging countries. J Dev Stud 56(12):2266–2292
Saidi K, Omri A (2020) Reducing CO2 emissions in OECD countries: do renewable and nuclear energy matter? Prog Nucl Energy 126:103425
Sanderson E, Windmeijer F (2016) A weak instrument F-test in linear IV models with multiple endogenous variables. J Econom 190(2):212–221
Sargan JD (1983) Identification and lack of identification. Econom: J Econom Soc 51:1605–1633
Sarkodie SA, Adams S (2018) Renewable energy, nuclear energy, and environmental pollution: accounting for political institutional quality in south africa. Sci Total Environ 643:1590–1601
Shahbaz M, Tiwari AK, Nasir M (2013) The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa. Energy Policy 61:1452–1459
Shahbaz M, Nasreen S, Ahmed K, Hammoudeh S (2017) Trade openness–carbon emissions nexus: the importance of turning points of trade openness for country panels. Energy Economics 61:221–232
Shukla PR, Skea J, Calvo Buendia E, Masson-Delmotte V, Pörtner HO, Roberts DC, Zhai P, Slade R, Connors S, van Diemen R, Ferrat M, Haughey E, Luz S, Neogi S, Pathak M, Petzold, J, Portugal Pereira J, Vyas P, Huntley E, Kissick K, Belkacemi M, Malley J (2019) IPCC, 2019: climate change and land: an IPCC special report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in terrestrial ecosystems
Singhania M, Saini N (2021) Demystifying pollution haven hypothesis: role of fdi. J Bus Res 123:516–528
Smith A (1976) An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford University Press, Oxford
Speck S (2017) Environmental tax reform and the potential implications of tax base erosions in the context of emission reduction targets and demographic change. Economia Politica 34(3):407–423
Squalli J, Wilson K (2011) A new measure of trade openness. World Econ 34(10):1745–1770
Stock J, Yogo M (2005) Asymptotic distributions of instrumental variables statistics with many instruments. Identif Inference Econ Models: Essays Honor Thomas Rothenberg 6:109–120
Sun H, Enna L, Monney A, Tran DK, Rasoulinezhad E, Taghizadeh-Hesary F (2020) The long-run effects of trade openness on carbon emissions in sub-Saharan African countries. Energies 13(20):5295
Tabachnick, B. G., Fidell, L. S., & Ullman, J. B. (2013). Using multivariate statistics, Boston, MA: pearson, 6:497–516
Tawiah VK, Zakari A, Khan I (2021) The environmental footprint of China-Africa engagement: an analysis of the effect of China-Africa partnership on carbon emissions. Sci Total Environ 756:143603
Udeagha MC, Ngepah N (2022a) Does trade openness mitigate the environmental degradation in South Africa? Environ Sci Pollut Res 29(13):19352–19377
Udeagha MC, Ngepah N (2022b) Dynamic ARDL simulations effects of fiscal decentralization, green technological innovation, trade openness, and institutional quality on environmental sustainability: evidence from South Africa. Sustainability 14(16):10268
Ulucak R, Ozcan B (2020) Relationship between energy consumption and environmental sustainability in OECD countries: the role of natural resources rents. Resour Policy 69:101803
UNCTAD (2023). Technology and Innovation Report (TIR) 2023. Opening green windows: technological opportunities for a low-carbon world. https://unctad.org/publication/technology-and-innovation-report-2023
Vural G (2020) How do output, trade, renewable energy and non-renewable energy impact carbon emissions inselected Sub-Saharan African Countries? Resour Policy 69:101840
Wang H, Luo Q (2022) Can a colonial legacy explain the pollution haven hypothesis? A city-level panel analysis. Struct Chang Econ Dyn 60:482–495
Wang L, Vo XV, Shahbaz M, Ak A (2020) Globalization and carbon emissions: is there any role of agriculture value-added, financial development, and natural resource rent in the aftermath of COP21? J Environ Manage 268:110712
World Bank (2020) World development report 2020: trading for development in the age of global value Chains. World Bank, Washington, DC
World Bank. (2022). World development indicators. Foreign direct investment, net inflows (BoP, current US$). Retrieved from The World Bank website: https://data.worldbank.org/indicator/bx.klt.dinv.cd.wd.
Yameogo CE, Omojolaibi JA, Dauda RO (2021) Economic globalisation, institutions and environmental quality in Sub-Saharan Africa. Res Glob 3:100035
York R, Rosa EA, Dietz T (2003) Footprints on the earth: the environmental consequences of modernity. Am Sociolog Rev 68:279–300
Zakari A, Tawiah V (2019) Impact of electricity consumption, financial development, trade openness on co 2 emissions: evidence from Nigeria. Econ Stud 28(4):143–157
Zerbo E (2017) Income-environment relationship in Sub-Saharan African countries: further evidence with trade openness. Environ Sci Pollut Res 24(19):16488–16502
Zhang S, Liu X, Bae J (2017) Does trade openness affect CO2 emissions: evidence from ten newly industrialized countries? Environ Sci Pollut Res 24(21):17616–17625
Author information
Authors and Affiliations
Contributions
DM: conceptualization, supervision, methodology, writing-original draft. EPT: methodology, data Curation, investigation, software, writing-original draft. ADMT: investigation, validation, visualization, writing-original draft.
Corresponding author
Ethics declarations
Conflict of interest
The authors declare no competing interests.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Mignamissi, D., Possi Tebeng, E.X. & Momou Tchinda, A.D. Does trade openness increase CO2 emissions in Africa? A revaluation using the composite index of Squalli and Wilson. Environ Syst Decis (2024). https://doi.org/10.1007/s10669-023-09962-7
Accepted:
Published:
DOI: https://doi.org/10.1007/s10669-023-09962-7