IDEAS home Printed from https://ideas.repec.org/a/sae/soueco/v25y2024i2p103-125.html
   My bibliography  Save this article

Trade, FDI and Emissions in South Asia: Role of Global and Regional Linkages

Author

Listed:
  • Pami Dua
  • Neha Verma
  • Deepika Goel

Abstract

The article investigates the long-run impact of global and regional linkages through trade, foreign investment and digitalization on reducing carbon emissions in five South Asian economies, namely Bangladesh, India, Nepal, Pakistan and Sri Lanka. Based on the data from 2006 to 2021, the study uses the fully-modified OLS technique for estimation after controlling for endogeneity, non-stationarity, cross-sectional dependence and cross-sectional heterogeneity in the panel data. The article finds that exports and FDI inflows reduce consumption-based emissions for South Asia, thereby strengthening the idea that trade in environment-friendly goods and services and the transfer of cleaner technologies could facilitate better adaptation to climate change in the region. The positive impact of imports on emissions indicates that the region imports products with high energy usage. Regional linkages are also found to mitigate carbon emissions, providing ground for such linkages to encourage policy frameworks for countering climate change-related risks. The output and energy consumption are found to impact consumption-based emissions positively. The policy recommendation that emerges from the article is to integrate trade, investment and climate change policies to foster sustainable growth in the South Asian region. JEL Codes: F18, F13, Q43

Suggested Citation

  • Pami Dua & Neha Verma & Deepika Goel, 2024. "Trade, FDI and Emissions in South Asia: Role of Global and Regional Linkages," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 25(2), pages 103-125, September.
  • Handle: RePEc:sae:soueco:v:25:y:2024:i:2:p:103-125
    DOI: 10.1177/13915614241279093
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/13915614241279093
    Download Restriction: no

    File URL: https://libkey.io/10.1177/13915614241279093?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Silva, Emilson C.D. & Zhu, Xie, 2009. "Emissions trading of global and local pollutants, pollution havens and free riding," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 169-182, September.
    2. Eberhardt, Markus & Teal, Francis, 2008. "Modeling technology and technological change in manufacturing: how do countries differ?," MPRA Paper 10690, University Library of Munich, Germany.
    3. Ren, Shenggang & Yuan, Baolong & Ma, Xie & Chen, Xiaohong, 2014. "International trade, FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors," China Economic Review, Elsevier, vol. 28(C), pages 123-134.
    4. Stern, David I., 2004. "The Rise and Fall of the Environmental Kuznets Curve," World Development, Elsevier, vol. 32(8), pages 1419-1439, August.
    5. Jing Zheng & Yu Xiang & Xunhua Tu, 2023. "Digital economy, spatial spillover and carbon intensity: concurrently on the threshold effect of human capital," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(2), pages 2178022-217, December.
    6. Ryan Abman & Clark Lundberg & Michele Ruta, 2024. "The Effectiveness of Environmental Provisions in Regional Trade Agreements," Journal of the European Economic Association, European Economic Association, vol. 22(6), pages 2507-2548.
    7. Kailan Tian & Yu Zhang & Yuze Li & Xi Ming & Shangrong Jiang & Hongbo Duan & Cuihong Yang & Shouyang Wang, 2022. "Regional trade agreement burdens global carbon emissions mitigation," Nature Communications, Nature, vol. 13(1), pages 1-12, December.
    8. Haug, Alfred A. & Ucal, Meltem, 2019. "The role of trade and FDI for CO2 emissions in Turkey: Nonlinear relationships," Energy Economics, Elsevier, vol. 81(C), pages 297-307.
    9. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    10. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    11. Hu, Guoheng & Can, Muhlis & Paramati, Sudharshan Reddy & Doğan, Buhari & Fang, Jianchun, 2020. "The effect of import product diversification on carbon emissions: New evidence for sustainable economic policies," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 198-210.
    12. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    13. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
    14. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    15. Eddy Bekkers & Joseph F. Francois & Hugo Rojas†Romagosa, 2018. "Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route," Economic Journal, Royal Economic Society, vol. 128(610), pages 1095-1127, May.
    16. Pesaran, M. Hashem & Vanessa Smith, L. & Yamagata, Takashi, 2013. "Panel unit root tests in the presence of a multifactor error structure," Journal of Econometrics, Elsevier, vol. 175(2), pages 94-115.
    17. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 353-377.
    18. Jeffrey A. Frankel & Andrew K. Rose, 2005. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 85-91, February.
    19. Khan, Zeeshan & Ali, Muhsin & Jinyu, Liu & Shahbaz, Muhammad & Siqun, Yang, 2020. "Consumption-based carbon emissions and trade nexus: Evidence from nine oil exporting countries," Energy Economics, Elsevier, vol. 89(C).
    20. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    21. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    22. Joakim Westerlund, 2005. "New Simple Tests for Panel Cointegration," Econometric Reviews, Taylor & Francis Journals, vol. 24(3), pages 297-316.
    23. Baghdadi, Leila & Martinez-Zarzoso, Inmaculada & Zitouna, Habib, 2013. "Are RTA agreements with environmental provisions reducing emissions?," Journal of International Economics, Elsevier, vol. 90(2), pages 378-390.
    24. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    25. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    26. Yue Dou & Kangyin Dong & Qingzhe Jiang & Xiucheng Dong, 2020. "How Does Trade Openness Affect Carbon Emission? New International Evidence," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 22(03n04), pages 1-31, December.
    27. Ruchir Agarwal & Vybhavi Balasundharam & Patrick Blagrave & Mr. Eugenio M Cerutti & Ragnar Gudmundsson & Racha Mousa, 2021. "Climate Change in South Asia: Further Need for Mitigation and Adaptation," IMF Working Papers 2021/217, International Monetary Fund.
    28. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    29. repec:bla:obuest:v:61:y:1999:i:0:p:631-52 is not listed on IDEAS
    30. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-737, September.
    31. Richard Kozul-Wright & Piergiuseppe Fortunato, 2012. "International Trade and Carbon Emissions," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 24(4), pages 509-529, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hussein Moghaddam & Robert M. Kunst, 2023. "The Role of Natural Gas in Mitigating Greenhouse Gas Emissions: The Environmental Kuznets Curve Hypothesis for Major Gas-Producing Countries," Sustainability, MDPI, vol. 15(5), pages 1-20, February.
    2. Shahbaz, Muhammad & Nasreen, Samia & Ahmed, Khalid & Hammoudeh, Shawkat, 2017. "Trade openness–carbon emissions nexus: The importance of turning points of trade openness for country panels," Energy Economics, Elsevier, vol. 61(C), pages 221-232.
    3. Prempeh Kwadwo Boateng & Frimpong Joseph Magnus & Yeboah Samuel Asuamah, 2024. "The dynamics of financial development, environmental degradation, economic growth and population health in the Economic Community of West African States," Environmental & Socio-economic Studies, Sciendo, vol. 12(2), pages 13-27.
    4. Muhammad Bilal Khan & Hummera Saleem & Malik Shahzad Shabbir & Xie Huobao, 2022. "The effects of globalization, energy consumption and economic growth on carbon dioxide emissions in South Asian countries," Energy & Environment, , vol. 33(1), pages 107-134, February.
    5. Ozcan, Burcu, 2013. "The nexus between carbon emissions, energy consumption and economic growth in Middle East countries: A panel data analysis," Energy Policy, Elsevier, vol. 62(C), pages 1138-1147.
    6. Muhammad Shahbaz & Syed Jawad Hussain Shahzad & Mantu Kumar Mahalik & Perry Sadorsky, 2018. "How strong is the causal relationship between globalization and energy consumption in developed economies? A country-specific time-series and panel analysis," Applied Economics, Taylor & Francis Journals, vol. 50(13), pages 1479-1494, March.
    7. Abdelaziz Boukhelkhal, 2022. "Energy use, economic growth and CO2 emissions in Africa: does the environmental Kuznets curve hypothesis exist? New evidence from heterogeneous panel under cross-sectional dependence," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(11), pages 13083-13110, November.
    8. Mohammad Mafizur Rahman & Xuan-Binh (Benjamin) Vu & Son Nghiem, 2022. "Economic Growth in Six ASEAN Countries: Are Energy, Human Capital and Financial Development Playing Major Roles?," Sustainability, MDPI, vol. 14(8), pages 1-17, April.
    9. Hosan, Shahadat & Rahman, Md Matiar & Karmaker, Shamal Chandra & Saha, Bidyut Baran, 2023. "Energy subsidies and energy technology innovation: Policies for polygeneration systems diffusion," Energy, Elsevier, vol. 267(C).
    10. Aladejare, Samson Adeniyi, 2022. "Natural resource rents, globalisation and environmental degradation: New insight from 5 richest African economies," Resources Policy, Elsevier, vol. 78(C).
    11. Karmaker, Shamal Chandra & Hosan, Shahadat & Chapman, Andrew J. & Saha, Bidyut Baran, 2021. "The role of environmental taxes on technological innovation," Energy, Elsevier, vol. 232(C).
    12. Francisco García-Lillo & Eduardo Sánchez-García & Bartolomé Marco-Lajara & Pedro Seva-Larrosa, 2023. "Renewable Energies and Sustainable Development: A Bibliometric Overview," Energies, MDPI, vol. 16(3), pages 1-22, January.
    13. Iheonu, Chimere & Asongu, Simplice & Odo, Kingsley & Ojiem, Patrick, 2020. "Financial Sector Development and Investment in Selected ECOWAS Countries: Empirical Evidence using Heterogeneous Panel Data Method," MPRA Paper 107102, University Library of Munich, Germany.
    14. Shahbaz, Muhammad & Nasreen, Samia & Abbas, Faisal & Anis, Omri, 2015. "Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries?," Energy Economics, Elsevier, vol. 51(C), pages 275-287.
    15. Tiwari, Sunil & Si Mohammed, Kamel & Guesmi, Khaled, 2023. "A way forward to end energy poverty in China: Role of carbon-cutting targets and net-zero commitments," Energy Policy, Elsevier, vol. 180(C).
    16. Xie, Bofeng & Rehman, Mubeen Abdur & Zhang, Junyan & Yang, Runze, 2022. "Does the financialization of natural resources lead toward sustainability? An application of advance panel Granger non-causality," Resources Policy, Elsevier, vol. 79(C).
    17. Nguyen Phuc Canh & Su Dinh Thanh, 2022. "The Dynamics of Export Diversification, Economic Complexity and Economic Growth Cycles: Global Evidence," Foreign Trade Review, , vol. 57(3), pages 234-260, August.
    18. Jaehyeok Kim & Hyungwoo Lim & Ha-Hyun Jo, 2020. "Do Aging and Low Fertility Reduce Carbon Emissions in Korea? Evidence from IPAT Augmented EKC Analysis," IJERPH, MDPI, vol. 17(8), pages 1-15, April.
    19. Shazia Kousar & Amber Pervaiz & Farhan Ahmed & Florian Marcel Nuţă, 2024. "Do Structural Transformations in the Energy Sector Help to Achieve Decarbonization? Evidence from the World’s Top Five Green Leaders," Energies, MDPI, vol. 17(18), pages 1-28, September.
    20. Xuejiao Ma & Qichuan Jiang, 2019. "How to Balance the Trade-off between Economic Development and Climate Change?," Sustainability, MDPI, vol. 11(6), pages 1-30, March.

    More about this item

    Keywords

    Regional integration; FDI; climate change; trade; panel cointegration; South Asia;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:soueco:v:25:y:2024:i:2:p:103-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ips.lk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.