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Trade-environment nexus in OIC countries: fresh insights from environmental Kuznets curve using GHG emissions and ecological footprint

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Abstract

Being closely correlated with income and economic growth, trade openness impacts the environmental quality through different means. The study analyzes the robustness of the environmental Kuznets curve (EKC) hypothesis in OIC countries by examining the extent to which trade openness influence environmental quality through different environmental indicators for the period 1991 to 2018. A new methodology dynamic common correlated effects (DCCE) is applied to resolve the issue of cross-sectional dependence (CSD). We have used greenhouse gas (GHG) emissions, carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) along with ecological footprint as indicators of environmental quality. Results of DCCE estimation identify a negative association of trade openness with CO2, N2O, and CH4, while the positive relationship with the ecological footprint in overall OIC countries and higher income OIC countries. On the other hand, trade openness has a positive association with all environmental indicators in lower income OIC countries. Our findings confirm that inverted-U-shaped EKC exists in all groups of OIC countries when CO2, CH4, and ecological footprint are used as environmental indicators. However, a U-shaped EKC exists in overall OIC countries and lower income OIC countries when N2O is used. Eventually, it is recommended that if OIC countries continue trade openness policies and energy sector reforms and maintain sustainable use of biocapacity; then, they will be able to combat environmental issues with the increase in income.

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Notes

  1. This relationship resembles the inverse-U-shaped GDP-income inequality pattern defined by Kuznets (1955).

  2. North American Free Trade Agreement

  3. VOCs (volatile organic compounds) are released from burning fuel such as coal, gasoline, wood, cigarettes, air fresheners, and pesticides. They easily become vapors or gases.

  4. See Konac (2004) and Ali et al. (2020)

  5. Fluorinated gases, i.e., perfluorocarbons, sulfur hexafluoride, and hydro-fluorocarbons.

  6. Metric tons of carbon dioxide equivalent

  7. In STATA, Jackknife command is useful to calculate robust standard errors and robust variance estimates. It is also helpful in case of small data size. Most STATA commands can be used with jackknife.

  8. For instance, see Aneja et al. (2019)

  9. Formula for calculating the turning point of EKC is defined in eq. 5 of model specification.

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Authors and Affiliations

  1. School of Business and Economics, Universiti Putra, Seri kembangan, Malaysia

    Sajid Ali, Zulkornain Yusop, Shivee Ranjanee Kaliappan & Lee Chin

  2. School of Economics, Bahauddin Zakariya University, Multan, Pakistan

    Sajid Ali

  3. Putra Business School, Seri kembangan, Malaysia

    Zulkornain Yusop

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Appendix

Appendix

Table 9 List of OIC countries with GHG emissions and ecological footprint
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Table 10 Classification of selected OIC countries
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Ali, S., Yusop, Z., Kaliappan, S.R. et al. Trade-environment nexus in OIC countries: fresh insights from environmental Kuznets curve using GHG emissions and ecological footprint. Environ Sci Pollut Res 28, 4531–4548 (2021). https://doi.org/10.1007/s11356-020-10845-6

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