The impact of intra-industry trade on carbon dioxide emissions: The case of the European Union

https://doi.org/10.17221/312/2019-AGRICECONCitation:Leitão N.C., Balogh J.M. (2020): The impact of intra-industry trade on carbon dioxide emissions: The case of the European Union. Agric. Econ. – Czech, 66: 203-214.
supplementary materialdownload PDF

The reductions of climate change and greenhouse gas emissions are an essential objective of the European Union (EU) to achieving the reduction target by 20% by 2020. Along with energy consumption and agriculture, trade has a diverse impact on climate change. International trade usually negatively affects the environment, while the influence of intra-industry trade is more favourable. The paper investigates the impact of energy use, agriculture, and intra-industry trade on environmental pollution in EU countries using panel data for the period 2000–2014. The research frames the theoretical hypothesis that describing the relationship between agricultural intra-industry trade and climate change. The assumptions are confirmed by panel fixed effects, and Generalized Method of Moment (GMM) estimations, and the panel cointegration test. The empirical results have supported by the literature, and all variables used in this study are stationary applying panel unit root test. Results show that agricultural intra-industry trade, renewable energy is negatively correlated with climate change, confirming the less pollutant hypothesis, while economic growth and agricultural productivity induce environmental problems. This study confirms the theoretical hypotheses explaining the effect of intra-industry trade for agricultural products as well as the impacts of renewable energy use, agricultural land productivity, and economic growth on CO2 emissions.

References:
Amador F.O., Francois F.J., Oberdabernig A.D., Tomberger P. (2017): Carbon dioxide emissions and economic growth: An assessment based on production and consumption emission inventories. Ecological Economics, 135: 269–279. https://doi.org/10.1016/j.ecolecon.2017.01.004
 
Antonakakis N., Chatziantoniou I., Filis G. (2017): Energy consumption, CO2 emissions, and economic growth: An ethical dilemma. Renewable and Sustainable Energy Reviews, 68: 808–824. https://doi.org/10.1016/j.rser.2016.09.105
 
Antweiler W., Copeland B.R., Taylor M.S. (2001): Is free trade good for the environment? American Economic Review, 91: 877–908. https://doi.org/10.1257/aer.91.4.877
 
Arellano M., Bover O. (1995): Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68: 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
 
Asumadu-Sarkodie S., Owusu P.A. (2017): The causal nexus between carbon dioxide emissions and agricultural ecosystem– an econometric approach. Environmental Science and Pollution Research, 24: 1608–1618. https://doi.org/10.1007/s11356-016-7908-2
 
Balassa B. (1986): Intra-industry specialization: A cross-country analysis. European Economic Review, 30: 27–42. https://doi.org/10.1016/0014-2921(86)90030-9
 
Balogh J.M., Jámbor A. (2017): Determinants of CO2 emission: A global evidence. International Journal of Energy Economics and Policy, 75: 217–226. Available at: www.econjournals.com/index.php/ijeep/article/view/5450/3328 (accessed Sept 1, 2019).
 
Balsalobre-Lorente D., Driha O.M., Bekun F.V., Osundina O.A. (2019): Do agricultural activities induce carbon emissions? The BRICS experience. Environmental Science and Pollution Research, 26: 25218–25234. https://doi.org/10.1007/s11356-019-05737-3
 
Bashir A., Thamrin H.M.K., Farhan M., Atiyatna D.P. (2019): The causality between human capital, energy consumption, CO2 emissions, and economic growth: Empirical evidence from Indonesia. International Journal of Energy Economics and Policy, 9: 98–104.
 
Bilan Y., Streimikiene D., Vasylieva T., Lyulyov O., Pimonenko T., Pavlyk A. (2019): Linking between renewable energy, CO2 emissions, and economic growth: Challenges for candidates and potential candidates for the EU membership. Sustainability, 11: 1–16. https://doi.org/10.3390/su11061528
 
Blundell R., Bond S. (1998): Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87: 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
 
Brülhart M., Elliott R., Lindley J. (2006): Intra-industry trade and labour-market adjustment: A reassessment using data on individual workers. Review of World Economics, 142: 521–545. https://doi.org/10.1007/s10290-006-0079-3
 
Cabral M., Silva J. (2006): Intra-industry trade expansion and employment reallocation between sectors and occupations. Review of World Economics, 142: 496–520. https://doi.org/10.1007/s10290-006-0078-4
 
Cole M.A., Elliott R.J.R. (2003): Do environmental regulations influence trade patterns? Testing old and new trade theories. World Economy, 26: 1163–1186. https://doi.org/10.1111/1467-9701.00567
 
Cole M.A., Elliott R.J.R., Okubo T. (2010): Trade, environmental regulations and industrial mobility: An industry-level study of Japan. Ecological Economics, 69: 1995–2002. https://doi.org/10.1016/j.ecolecon.2010.05.015
 
Copeland B.R., Taylor M.S. (1994): North-south trade and the environment. Quarterly Journal of Economics, 109: 755–87. https://doi.org/10.2307/2118421
 
Copeland B.R., Taylor M.S. (2004): Trade, growth and the environment. Journal of Economic Literature, 42: 7–71. https://doi.org/10.1257/.42.1.7
 
Chin M.Y., Puah C.H., Joseph J. (2018): The determinants of CO2 emissions in Malaysia: A new aspect. International Journal of Energy Economics and Policy, 8: 190–194. Available at: www.econjournals.com/index.php/ijeep/article/view/5912/3521
 
Choi I. (2001): Unit root tests for panel data. Journal of International Money and Finance, 20: 249–272. https://doi.org/10.1016/S0261-5606(00)00048-6
 
Dasgupta P., Mukhopadhyay K. (2018): Pollution hypothesis and Indian´s intra-industry trade: an analysis. International Journal of Innovation and Sustainable Development, 12: 287–307. https://doi.org/10.1504/IJISD.2018.091538
 
Edoja P.E., Aye G.C., Abu O. (2016): Dynamic relationship among CO2 emission, agricultural productivity and food security in Nigeria. Cogent Economics & Finance, 4: 1–13.
 
Echazu L., Heintzelman M. (2018): Environmental regulation and love for variety. Review of International Economics, 27: 413–429.
 
European Commission (2019): EUROSTAT Statistics. Greenhouse Gas Emission Statistics – Emission Inventories. Available at: ec.europa.eu/eurostat/statistics-explained/pdfscache/1180.pdf (accessed Sept 1, 2019).
 
FAO (2019): Food and Agriculture Organization of United Nations, FAOSTAT Statistics Data. Available at: http://www.fao.org/faostat/en/#data (accessed Sept 18, 2019).
 
Greenaway D., Hine R., Milner C. (1994): Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK. Weltwirtschaftliches Archiv, 130: 77–100. https://doi.org/10.1007/BF02706010
 
Grether J.M., Matys A.N., De Melo J. (2010): Global manufacturing SO2 emissions: does trade matter? Review of World Economics, 145: 713–729. https://doi.org/10.1007/s10290-009-0033-2
 
Grubel H., Lloyd P. (1975): Intra-industry trade. The theory and measurement of international trade in differentiation products. London, The Macmillan Press.
 
Gürtzgen N., Rauscher M. (2000): Environmental policy, intra-industry trade and transfrontier pollution. Environmental and Resource Economics, 17: 59–71. https://doi.org/10.1023/A:1008340519683
 
Hasnisah A., Azlina A.A., Taib C.M.I.C. (2019): The impact of renewable energy consumption on carbon dioxide emissions: Empirical evidence from developing countries in Asia. International Journal of Energy Economics and Policy, 9: 135–143. https://doi.org/10.32479/ijeep.7535
 
Haupt A. (2006): Environmental policy in open economies and monopolistic competition. Environmental and Resource Economics, 33: 143–167. https://doi.org/10.1007/s10640-005-2645-x
 
Im K.S., Pesaran M.H., Shin Y. (2003): Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115: 53–74.
 
Ito T., Okubo T. (2012): New aspects of intra-industry trade in EU countries. The World Economy, 35: 1126–1138. https://doi.org/10.1111/j.1467-9701.2012.01476.x
 
Jámbor A., Leitão N.C. (2016): Industry-specific determinants of vertical intra-industry trade: the case of EU new member states’ agri-food sector. Post-Communist Economies, 28: 34–48. https://doi.org/10.1080/14631377.2015.1124553
 
Jebli B.M., Youssef S.B., Apergis N. (2019): The dynamic linkage between renewable energy, tourism, CO2 emissions, economic growth, foreign direct investment, and trade. Latin American Economic Review, 28: 1–19.
 
Kahn M.E, Yoshino Y. (2004): Testing for pollution haven inside and outside of regional trade blocs. The B.E. Advances in Economic Analysis Policy, 3: 1–32.
 
Krugman P. (1979): Increasing returns, monopolistic competition, and international trade. Journal of International Economics, 9: 469–479. https://doi.org/10.1016/0022-1996(79)90017-5
 
Krugman P. (1980): Scale economies, product differentiation, and the pattern of trade. American Economic Review, 70: 950–959. Available at: www.jstor.org/stable/1805774 (accessed Sept 1, 2019).
 
Leitão N.C., Shahbaz M. (2013): Carbon dioxide emissions, urbanization and globalization: A dynamic panel data. Economic Research Guardian, 3: 22–32.
 
Levin A., Lin C.-F., Chu C.-S.J. (2002): Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108: 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
 
Maddala G.S., Wu S. (1999): A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61: 631–652. https://doi.org/10.1111/1468-0084.0610s1631
 
Martínez-Zarzoso I., Maruotti A. (2011): The impact of urbanization on CO2 emissions: Evidence from developing countries. Ecological Economics, 70: 1344–1353. https://doi.org/10.1016/j.ecolecon.2011.02.009
 
Melitz M.J., Trefler D. (2012): Gains from trade when firms matter. Journal of Economic Perspectives, 26: 91–118. https://doi.org/10.1257/jep.26.2.91
 
Omri A., Kahouli B. (2014): Causal relationships between energy consumption, foreign direct investment and economic growth: Fresh evidence from dynamic simultaneous-equations models. Energy Policy, 67: 913–922. https://doi.org/10.1016/j.enpol.2013.11.067
 
Pant P.K. (2009): Effect of agriculture on climate change: A cross country study of factor affecting carbon emissions. The Journal of Agriculture and Environment, 10: 72–88. https://doi.org/10.3126/aej.v10i0.2134
 
Paweenawat S.W., Plyngam S. (2017): Does the causal relationship between renewable energy consumption, CO2 emissions, and economic growth exist in Thailand? An ARDL approach. Economics Bulletin, 37: 697–711. Available at: pdfs.semanticscholar.org/18f6/ad2c63664d2ea635272c554a588fa9eaadb2.pdf (accessed Sept 1, 2019).
 
Pedroni P. (2001): Purchasing power parity tests in cointegrated panels. Review of Economics and Statistics, 83: 727–731. https://doi.org/10.1162/003465301753237803
 
Pedroni P. (2004): Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20: 597–625. https://doi.org/10.1017/S0266466604203073
 
Rasekhi S., Shojaee S.S. (2012): Determinant factors of the vertical intra-industry trade in agricultural sector: A study of Iran and its main trading partners. Agricultural Economics – Czech, 58: 180–190. https://doi.org/10.17221/13/2011-AGRICECON
 
Roy J. (2017): On the environmental consequences of intra-industry trade. Journal of Environmental Economics and Management, 83: 50–67. https://doi.org/10.1016/j.jeem.2016.12.006
 
Ruffin R.J. (1999): The nature of significance of intra-industry trade. Federal Reserve Bank of Dallas Economic & Financial Review, Fourth Quarter: 1–9. Available at: www.dallasfed.org/~/media/documents/research/efr/1999/efr9904a.pdf (accessed Sept 1, 2019).
 
Saidi K., Hammami S. (2015): The impact of CO2 emissions and economic growth on energy consumption in 58 countries. Energy Reports, 1: 62–70. https://doi.org/10.1016/j.egyr.2015.01.003
 
Sukono S., Albra W., Zulham T., Iskandarsyah Saputra J., Subartini B., Thalia F. (2019): The effect of gross domestic product and population on CO2 emissions in Indonesia: An application of the ant colony optimisation algorithm and Cobb-Douglas model. International Journal of Energy Economics and Policy, 9: 313–319. https://doi.org/10.32479/ijeep.8011
 
Tariq B., Rahim Ab. R. (2016): The environmental effects of intra-industry trade in the SAARC region. International Journal of Business and Society, 17: 113–130. Available at: www.ijbs.unimas.my/images/repository/pdf/Vol17-no1-paper8.pdf (accessed Sept 1, 2019).
 
Ullah A., Khan D., Khan I., Zheng S. (2018): Does agricultural ecosystem cause environmental pollution in Pakistan? Promise and menace. Environmental Science and Pollution Research, 25: 13938–13955. https://doi.org/10.1007/s11356-018-1530-4
 
Wang H., Ang B.W. (2018): Assessing the role of international trade in global CO2 emissions: An index decomposition analysis approach. Applied Energy, 218: 146–158. https://doi.org/10.1016/j.apenergy.2018.02.180
 
World Bank (2019a): World Development Indicator (WDI) Data. Available at: databank.worldbank.org/source/world-development-indicators (accessed Sept 1, 2019).
 
World Bank (2019b): World Integrated Trade Solution (WITS). Available at: wits.worldbank.org (accessed Oct 10, 2019).
 
Yoshida Y., Leitão N.C., Faustino, H.C. (2009): Vertical intra-industry trade and foreign direct investment between Japan and European countries. Atlantic Economic Journal, 37: 351–365. https://doi.org/10.1007/s11293-009-9192-8
 
supplementary materialdownload PDF

© 2020 Czech Academy of Agricultural Sciences