The Role of Trade and Energy in Generating Carbon Emissions and Environmental Degradation

Abstract

Studies have incorporated trade and energy as determinants of emissions in the environmental Kuznets curve model to mitigate carbon emissions. These studies mostly focused on the overall trade without regard to goods trade that is more polluting. To this end, this study used a panel of African countries and investigate the role of goods trade and energy in generating carbon emissions. We utilized random coefficients and the generalised method of moment. Our findings confirmed the existence of the environmental Kuznets curve hypothesis. Findings further indicate that trade increases emissions and there exists evidence of non-linear nexus between trade and emissions. The composition effect increases emissions, but the effect is not robust to different estimates. Energy increases emissions, and the indirect effect of trade through energy revealed no evidence that trade has allowed Africa the use of an energy-efficient technique of production which reduces carbon emissions. Findings also confirmed the existence of income and factor abundance pollution haven hypothesis. Therefore, trade and energy should be considered in emissions mitigation policy.