Does trade matter for carbon emissions in OECD countries? Evidence from a new trade openness measure

Abstract

This paper analyzes the impacts of the per capita income, the per capita energy consumption, and the trade openness on the level of per capita carbon emissions in the panel dataset of 35 Organization for Economic Cooperation and Development (OECD) countries over the period 1960-2013. Along with the nominal trade openness, the paper uses a different trade openness measure, so called as the trade potential index (TPI). To the best of our knowledge, this is the first paper that uses the TPI in the empirical environmental Kuznets curve (EKC) hypothesis literature. The paper finds that the EKC hypothesis is valid and there is an inverted-U relationship between the income and the carbon emissions. In addition, the paper observes that there is a positive effect of the energy consumption on the carbon emissions. Furthermore, the results indicate that both trade openness measures are negatively associated with the carbon emissions in the OECD countries in the long run.