Trade agreements and CO2 emissions in Asian countries: accounting for institutional heterogeneity.

This paper aims to measure the impact of environmental provisions in free-trade agreements on pollution levels in 40 Asian economies for the period 1990-2019. Following the failure of WTO negotiations, there has been a rapid proliferation of preferential trade agreements incorporating various types of environmental clauses. We exploit such changes to assess their influence on pollution emissions. We use a DOLS approach that considers the potential endogeneity of environmental clauses. Further, panel vector error correction models (VECM) are employed for examining the presence of a cointegration relationship among the variables studied. Overall, our findings indicate that these environmental clauses have heterogenous effects on CO2 emissions. We do not find significant effects of environmental clauses on pollution. However, this result is driven by environmental provisions that are not legally enforceable. We do find a positive effect of environmental clauses with a higher level of legalism on the environmental quality. These results show that the inclusion of environmental provisions in trade agreements is not sufficient by itself. Such provisions should incorporate a legally enforceable framework to effectively address environmental concerns. These findings have significant policy implications for Asian countries.

FDI and CO2 emissions in developing countries: the role of human capital.

FDI inflows remain an important source of economic growth and technology transfer for developing countries. However, the proponents of the pollution haven hypothesis (PHH) argue that FDI inflows may result in the production of polluted goods in poor economies. The empirical testing of PHH reveals conflicting outcomes on the subject. This study argues that foreign firms' choice of specific technologies and hence the validity of PHH can be determined by host countries' level of education. For developing economies having low levels of schooling, FDI inflows will accompany polluted technologies. Nonetheless, when education levels exceed certain thresholds, FDI inflows may reduce CO2 emissions. For our empirical investigation, we rely upon a large panel of 108 developing countries during 2000-2016. Our estimated outcomes, based on the panel cointegration method and panel vector error correction methods (P-VECM), confirm these moderating effects of human capital in the FDI-CO2 emissions nexus. The empirical results also confirm the presence of the environmental Kuznets curve (EKC) for developing countries. These results have important policy implications for the sample economies.

Institutional quality and CO2 emission-output relations: The case of Asian countries.

Although Asian economies have registered strong economic growth over the last few decades, their growing pollution emissions raise concerns among the policymakers about the sustainability of this output growth. This paper tests the causal relationship between economic development, energy consumption, trade openness, financial development, FDI, government expenditures, institutional quality. and pollution emissions for 41 Asian economies from 1996 to 2015. Further, we separately test the impact of political and economic institutions on pollution emissions of the sample economies. Our estimated outcomes, based on the panel cointegration method and panel vector error correction models (VECM), substantiate the presence of a cointegration relationship among all the selected variables. While economic development, energy use, trade openness, and FDI augment environmental degradation, financial development and better economic institutions help the selected countries in reducing their pollution emissions. Moreover, better economic and political institutions also mediate the adverse impact of income, trade openness, and FDI on pollution emissions. The VECM model shows that per capita GDP is the only variable having a causal effect on pollution emissions in all the models. For all the other variables, the causal effect is significant only in a few cases. These outcomes have some important policy recommendations for the sample economies.