Free Trade and Carbon Emissions Revisited: The Asymmetric Impacts of Trade Diversification and Trade Openness

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Free trade and carbon emissions revisited: The asymmetric impacts of trade
diversiﬁcation and trade openness
Article in Sustainable Development · August 2023

DOI: 10.1002/sd.2703
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DOI: 10.1002/sd.2703
RESEARCH ARTICLE
Free trade and carbon emissions revisited: The asymmetric

impacts of trade diversification and trade openness
Qiang Wang 1,2 | Fuyu Zhang 1 | Rongrong Li 1,2
1
School of Economics and Management, China
University of Petroleum (East China), Qingdao, Abstract
People's Republic of China
In the context of trade protectionism impacting economic and environmental sustain-
2
School of Economics and Management,
Xinjiang University, Wulumuqi, People's ability, a more comprehensive understanding of the impact of trade on carbon emis-
Republic of China sions is critical to economic and environmental sustainability. Existing literature
Correspondence
mainly explores the impact of trade on carbon emissions from the perspective of
Qiang Wang and Rongrong Li, School of trade openness, neglecting the perspectives of trade diversification and trade direc-
Economics and Management, China University
of Petroleum (East China), Qingdao 266580,
tion. This study aims to fill this gap by investigating the impact of trade openness
People's Republic of China. (measured by trade volume, import, and export), and trade diversification (measured
Email: wangqiang7@upc.edu.cn and lirr@upc.
edu.cn
by import diversification and export diversification) on carbon emissions based on
data from OECD and G20 countries between 1997 and 2019. The study further
Funding information
National Natural Science Foundation of China,
explores the heterogeneity, asymmetry, and mediation effects. The results demon-
Grant/Award Number: 72104246 strate that (i) the impact of trade on carbon emissions is heterogeneous, with trade
openness leads to an increase in carbon emissions, while trade diversification leads
to a reduction in carbon emissions. Moreover, import diversification has the stron-
gest effect on reducing carbon emissions. (ii) The impact of trade openness on carbon
emissions is asymmetry. Trade openness increases carbon emissions at 10%–50%
quantile levels and reduces carbon emissions at 80%–90% quantile levels. However,
the impact of trade diversification on carbon emissions is consistent. (iii) The impact
of trade openness on carbon emissions is mediated by technology effect and struc-
tural effect. On one hand, trade openness leads to an increase in carbon emissions by
the industrial structure. On the other hand, it contributes to the reduction of carbon
emissions by technological progress. These findings could serve to better understand
the complexity of free trade's impact on economic and environmental sustainability.
KEYWORDS
asymmetric analysis, carbon emission, heterogeneity analysis, mediation effect, trade
diversification, trade openness
1 | I N T RO DU CT I O N alone. The World Bank reports that the contribution of international

trade to gross domestic product (GDP) has also risen from 25% in
In the past few decades, globalization has progressed at an accelerat- 1970 to 52% in 2020 (Bank, 2023b). While trade openness has the
ing pace, with trade openness deepening particularly in the emerging potential to promote economic development, it is also closely associ-
markets of Asia and Africa (Demiral et al., 2022; Demiral & ated with a rise in environmental pollution (Zhong et al., 2021). For
Demiral, 2021). As a result, the total volume of international trade has instance, global carbon dioxide emissions reached 34.34 million kt in
continued to increase, growing by 75% between 2000 and 2020 2019, a 67% increase from 1990 (Bank, 2023a). On November
876 © 2023 ERP Environment and John Wiley & Sons Ltd. wileyonlinelibrary.com/journal/sd Sustainable Development. 2024;32:876–901.
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WANG ET AL. 877
13, 2021, the 26th Conference of the Parties (COP26) of the United namely China, the United States, Germany, Japan, the Netherlands,
Nations Convention on Climate Change (UNFCCC) adopted the Glas- South Korea, the United Kingdom, and France, and plays a vital role in
gow Climate Convention, which requires countries to maintain the global trade (WTO, 2019). Second, these countries are significant con-
Paris Agreement and limit global temperature rise to 1.5 C. In tributors to global carbon emissions, with 67% of global carbon diox-
response, countries around the world have set goals for achieving car- ide emissions in 2019 originating from this group (Bank, 2023a).
bon neutrality. Consequently, scholars have begun to focus on the Notably, China and the United States, the top emitters, are both part
relationship between trade and carbon emission reduction of this group. These distinctive characteristics make them invaluable
(Wiedmann & Lenzen, 2018; Yang et al., 2020). for examining the impact of trade openness on carbon emissions.
In recent years, the global economy has experienced a slowdown Third, the OECD and G20 are international organizations that share
in growth due to the COVID-19 pandemic and Russo-Ukrainian War the common goal of promoting the economic development of their
(Burgess et al., 2021). In this regard, some countries have implemen- member countries. Both organizations support free trade and an open
ted protectionist measures, including raising tariffs and imposing non- market economy as fundamental principles for economic growth. In
tariff barriers, to safeguard their economic interests and industrial 2019, the 30 countries from the OECD and G20 contributed a signifi-
competitiveness (Fajgelbaum et al., 2019). While the trend of interna- cant 73% of global GDP, which is measured in constant 2015 US dol-
tional trade becomes increasingly complex, the International Mone- lars. Additionally, there are several trade agreements between them,
tary Fund (IMF) and the World Bank (WB) continue to advocate for including the European Union (EU) Free Trade Agreement, the Associ-
trade openness and diversification strategies for both developed and ation of Southeast Asian Nations Free Trade Area (ASEAN FTA), the
developing countries (IMF, 2022; WB, 2022). Similarly, the World China-Japan-Korea FTA, and the United States-Mexico-Canada Free
Trade Organization (WTO) has emphasized the importance of trade Trade Agreement (USMCA), and so forth which aim to expand trade
diversification over decoupling, despite the ongoing disruption of openness between member countries. Therefore, exploring the rela-
global supply chains (WTO, 2022). Accordingly, the WTO has devel- tionship between trade and carbon emissions among OECD and G20
oped the “Trade Facilitation Agreement” to promote a more diversi- countries is of great significance.
fied global market. Trade diversification refers to the process by In view of the above issues, this study conducts empirical analy-
which firms, countries, or other economic entities offer a range of sis based on 23-year data from OECD and G20 countries from
products or services rather than focusing on a single product or ser- 1997 to 2019. First, this study evaluates the impact of trade diversi-
vice (Meng et al., 2022). Trade diversification encompasses both prod- fication and trade openness on carbon emissions using the general-
uct and market diversification, which can be assessed through ized method of moments (GMM), fully modified ordinary least
measures such as import diversification (IDIV) and export diversifica- squares (FMOLS), and cross-sectionally augmented auto regressive
tion (EDIV). It represents a prominent characteristic of the trade struc- distributed lagged (CS-ARDL) techniques. Second, this study further
ture (Sun et al., 2023). Trade diversification is a common economic investigates asymmetric effects using panel quantile regression.
strategy used by countries to increase competitiveness and expand Finally, this study explores the mediating mechanisms between
their exports. However, this strategy often results in an increase in trade and carbon emissions through a mediation model. This study
energy consumption needed to sustain the production of export com- has three contributions: first, this study systematically examines the
modities. Unfortunately, this increase in energy consumption is often impact of trade diversification on carbon emissions using two indi-
accompanied by a corresponding rise in carbon emissions, which has cators (EDIV and IDIV), providing an analysis of the relationship
contributed to the global problem of climate change. On the other between trade and carbon emissions from the perspective of trade
hand, for economies that specialize in the production of high- diversification. Second, this study investigates the potential hetero-
carbon-emitting industrial products, such as cement and metal, trade geneity and asymmetry between trade openness, trade diversifica-
diversification can be an effective approach to reducing carbon emis- tion, and carbon emissions. This investigation provides a more in-
sions. Therefore, it is necessary to conduct a thorough evaluation of depth understanding of the impact of trade on the environment
the relationship between trade and carbon emissions. This study aims across different trade directions and carbon emission levels. It pro-
to address three critical questions: (1) Do trade openness and trade vides a basis for different countries to formulate green growth trade
diversification help reduce carbon emissions? (2) Is there any hetero- policies. Finally, this study examines the scale effect, technology
geneity or asymmetry across trade directions and carbon emission effect, and structural effect of trade openness on carbon emissions,
levels? (3) More importantly, how do trade affect carbon emissions? thereby offering new evidence based on intrinsic impact mecha-
Addressing these issues is critical for countries to achieve low-carbon nisms to enable governments to develop effective trade policies for
development by adjusting trade policies. achieving carbon neutrality.
This study focuses on 30 countries from the Organization for The following is an overview of the remainder of this study.
Economic Co-operation and Development (OECD) and the Group of Section 2 is a literature review. Section 3 presents the theoretical
Twenty (G20) for three reasons. First, these countries bear substantial mechanisms and hypothesizes on how trade affects carbon emissions.
weight as major players in global trade, accounting for a notable 65% Section 4 describes the model and data. Section 5 presents the results
share of both global exports and imports in 2019 (Bank, 2023b). Sig- of the empirical analysis. Further discussion are carried out in Sec-
nificantly, this group includes the world's top eight trading entities, tion 6. Conclusions and policy implications are in Section 7.
878 WANG ET AL.
2 | LITERATURE REVIEW countries consume different energy to produce the same commodity,
which leads to different carbon emissions when different countries
2.1 | Literature on the impact of trade openness produce the same quantity of commodity. If a country can import
on carbon emissions energy-intensive goods from other countries, it can reduce carbon
emissions by importing goods (Jayanthakumaran et al., 2012). If a
The relationship between trade openness and carbon emissions has country can import energy-intensive goods from other countries, it
been a hot topic in the field of environmental economics (Li, Dong, can reduce carbon emissions by importing goods (Sbia et al., 2014).
Dong, & Shahbaz, 2022; Steinberger et al., 2012; Yang et al., 2020). Second, the transportation mode is also a significant factor affecting
Studies have shown that in the context of globalization and economic carbon emissions associated with trade (Cristea et al., 2013). The dis-
integration, the impact of trade on the environment has gradually tance and transportation mode used to transport goods also affects
become prominent (Wang, Zhang, & Li, 2023). There are two opposing the carbon footprint associated with trade (Peters et al., 2009).
hypotheses about the relationship between trade and carbon emis- Importing goods from trading partners closer to home can help reduce
sions. One is the pollution haven hypothesis that was proposed earlier carbon emissions from long-distance transportation (Mundaca
(Taylor, 2005). This hypothesis posits that when enterprises from et al., 2021). Third, the role of technology in trade is crucial. For
large industrialized countries establish manufacturing facilities over- instance, Muhammad et al. analyzed Indonesia's economic growth,
seas, they typically opt for locations where resources and labor are energy consumption, financial development, trade openness, and car-
the most cost-effective, with the primary objective of obtaining the bon emissions and found that financial development and trade open-
required land and raw materials. Typically, these locations are in ness led to a reduction in carbon emissions. The study argues that
developing countries where resources and labor are relatively inex- financial development and trade openness based on energy-efficient
pensive, and environmental regulations are comparatively less strin- technologies can play a critical role in improving environmental quality
gent. Consequently, corporations that invest in foreign countries tend (Shahbaz et al., 2013). Finally, consumer behaviors and market signals
to relocate to locations with the weakest environmental standards or also play a significant role in the trade-carbon emissions relationship.
least rigorous enforcement (Solarin et al., 2017). The study findings Trade also affects consumer behaviors in purchasing goods. By
indicate that in the course of globalization, certain countries with importing goods from countries with greener production methods,
lower environmental protection standards and less stringent regula- consumers can reduce their carbon emissions during consumption
tory measures have become more attractive to companies seeking (Sadorsky, 2012). Based on the above analysis, many scholars have
to transfer production and investment overseas, resulting in a worsen- carried out empirical research on the impact of trade openness on the
ing of environmental pollution in those countries (Kearsley & environment in different regions, but they have reached different
Riddel, 2010). MA Cole et al pointed out that there is a connection conclusions. Currently, there exist two predominant perspectives
between this hypothesis and the environmental Kuznets curve (EKC) concerning the impact of trade openness on carbon emissions.
hypothesis (Cole, 2004). The EKC postulates that a country's level of The first standpoint holds that trade openness has a positive
pollution tends to increase as it undergoes industrialization and eco- impact on carbon emissions. In a country-specific study, Shahzad
nomic development until it reaches a turning point. After this critical et al. found that a 1% increase in Pakistan's trade openness would
threshold, the country begins to invest in environmental protection increase carbon emissions by 0.122% in the short run and 0.247%
and cleanup efforts, leading to a decline in pollution levels (Kaika & in the long run, using both long- and short-run estimates. As
Zervas, 2013). Several studies have suggested that the clean environ- Pakistan's trade openness increases carbon emissions, the policy
ment of developed countries may come at the cost of a more polluted focus needs to be on the productive use of energy (Shahbaz
environment in developing countries, based on the EKC (Dogan & et al., 2017). Naranpanawa (2011) conducted a cointegration test
Turkekul, 2016). Therefore, the EKC may be considered as a manifes- and a Granger causality test on the relationship between Sri Lanka's
tation of the pollution haven hypothesis. The second hypothesis is the trade openness and carbon dioxide emissions from 1960 to 2006,
pollution halo hypothesis, which is the opposite of the pollution haven and found that trade openness led to an increase in carbon dioxide
hypothesis (Ahmad et al., 2021). According to this hypothesis, multi- emissions. Expanding the research object to the world, in an empiri-
national corporations have developed more advanced environmental cal study using panel data from 105 countries/regions, the results
protection technologies, and these technologies spill over during the of the panel causality model confirm that trade openness increases
process of overseas investment, leading to improvements in local carbon emissions for global, high-income, middle-income, and low-
environmental protection technologies and standards. This can have a income groups. But the impacts vary across these different country
positive impact on the environment of the host country (Duan & groups. Furthermore, the VECM causality results highlight the feed-
Jiang, 2021). back effect between trade openness and carbon emissions at the
Numerous studies have examined how trade affects carbon emis- global level and in middle-income countries (Shahbaz et al., 2017).
sions, including the direction and reasons behind this relationship Based on the random regression model, Kozul-Wright and Fortuna-
(Kanemoto et al., 2014; Liddle, 2018). First, energy consumption dur- to's research (2012) found that the impact of international trade on
ing production processes has been identified as a critical factor affect- carbon emissions is positive and significant. Trade tends to increase
ing carbon emissions resulting from trade (Sadorsky, 2011). Different the emissions burden, especially in less industrialized countries.
WANG ET AL. 879
Similarly, for 12 selected MENA economies Omri et al. apply the partner, thereby increasing economic stability while reducing economic
GMM model and observe that trade openness increases carbon risk (Mania & Rieber, 2019). Moreover, the benefits of trade diversifica-
emissions (Omri et al., 2015). Ansari and others took the tion extend beyond economic growth, as it can influence carbon emis-
United States, Japan, Canada, Iran, Saudi Arabia, and other major sions through various mechanisms (Khan et al., 2021). First,
carbon dioxide emitting countries as research objects, and found diversification of trade is often accompanied by changes in trade struc-
that the increase in trade volume will indeed lead to an increase in ture, allowing a country to decrease its dependence on high-
carbon dioxide emissions (Ansari et al., 2020). carbon-emitting products and consequently decrease its own carbon
The second standpoint posits that trade openness has a negative emissions (Liu et al., 2019). Second, the type of commodity is a critical
impact on carbon emissions. Al-Mulali et al. conducted an empirical factor that determines the impact of trade diversity on carbon emis-
study to analyze the impact of trade openness on pollution levels in a sions (Haini et al., 2023). The environment is impacted differently by
sample of 23 European countries spanning the period from 1990 to various commodities. Production and transportation of certain com-
2013. Employing rigorous methodologies such as the Pedroni cointe- modities consume excessive energy and water, resulting in a higher car-
gration test and least squares (OLS) regression, the researchers dem- bon emission rate. Importing these types of goods raises carbon
onstrated that trade openness exerts a considerable influence on the an, et al., 2021). Third, trade patterns may also
emissions (Shahzad, Dog
quantity of carbon dioxide emissions. Their findings provide robust have an impact on carbon emissions (Lee & Ho, 2022). The high volume
evidence supporting the notion that increased trade openness con- of re-export trade employed by some countries, for instance, can lead
tributes to a reduction in carbon dioxide emissions. These results to significant energy and resource waste during transportation and
highlight the importance of trade openness as a viable strategy for repackaging, ultimately increasing carbon emissions (Khan et al., 2021).
fostering environmental conservation (Al-Mulali et al., 2015). In their Fourthly, resource utilization is another aspect influenced by trade
study, Hasanov et al. (2018) utilized panel data analysis to explore the diversification. For example, if a country imports the same goods from
separate effects of exports and imports on carbon emissions in nine different trading partners, those goods may need to be produced using
major exporting economies. Employing first- and second-generation different resources. This can result in a waste of resources, thereby
panel methods for cointegration and error correction modeling, the increasing carbon emissions (Shahbaz et al., 2019). Due to import and
research examines the long-term and short-run impacts. The results export activities may have different carbon footprint. Recent studies on
demonstrate a negative relationship between exports, imports, and the impact of trade diversification on carbon emissions have gradually
consumption-based CO2 emissions, indicating that these economic conducted separate studies on IDIV and EDIV.
factors contribute to a reduction in carbon emissions (Hasanov In the relationship between IDIV and carbon emissions, empirical
et al., 2018). An additional study employed a simultaneous equation evidence supports the notion that IDIV contributes to a reduction in
model to analyze the energy-environment-GDP relationship in 14 Mid- energy and carbon intensity, thereby improving energy efficiency
dle East and North African countries. Despite trade openness being a within OECD countries. Consequently, IDIV emerges as a viable strat-
control variable, the GMM estimation findings highlight a substantial egy to address energy intensity and mitigate carbon externalities. These
and negative impact of trade openness on carbon emissions in all findings can be attributed to two potential explanations. First, the input
countries, except Iran (Omri, 2013). In their study, Al Mamun et al. base of imported products and the extent of fossil fuel energy utiliza-
(2014) provided a conclusive finding, suggesting a generally negative tion play a crucial role. Second, the impact of IDIV on carbon emissions
relationship between trade openness and emissions in the majority of an et al., 2022). In general, developed
may be relatively limited (Dog
countries. countries aim to import high-quality products from developing coun-
In brief, the existing literature on the impact of trade openness on tries (Jaimovich, 2012). Therefore, developing countries are constantly
carbon emissions yields uncertain research conclusions. Some studies striving to improve the quality of their products. Such efforts could
indicate a positive relationship, emphasizing the risk of carbon leak- have implications for the country's environmental quality (Gozgor &
age, while others suggest a negative relationship, highlighting the Can, 2017). If governments do not strictly enforce environmental laws,
potential for technology diffusion and cleaner production practices. the positive contribution of IDIV to improving the environment in
Therefore, further research is necessary to provide more comprehen- developing countries will remain low or negative (Parteka &
sive insights into the relationship between trade openness and carbon Tamberi, 2013). In a global study, AMG and CCE-MG found that diver-
emissions. sification of imported products significantly reduced and increased car-
bon emissions in developed and developing economies, respectively.
Therefore, diversification of imported products plays an important role
2.2 | Literature on the impact of trade in reducing carbon emissions, especially in advanced economies. How-
diversification on carbon emissions ever, diversification of imported products will not help developing
economies reduce carbon emissions (Hu et al., 2020).
The correlation between a country's economic development and its In the relationship between EDIV and carbon emissions, Bashir
participation in international trade is well-established (Jiang et al. conducted an empirical study analyzing the impact of three EDIV
et al., 2022). Trade diversification is a crucial aspect of this relationship indicators―export product diversification, extensive margin, and
as it reduces a country's dependence on a particular market or trading intensive margin―on energy intensity and carbon intensity. The
880 WANG ET AL.
findings indicate that EDIV has a positive impact on reducing energy especially regarding the relationship between trade diversification and
intensity in OECD countries (Bashir et al., 2020). The impact of trade carbon emissions. Second, it is essential to distinguish the differential
diversification on carbon emissions may vary depending on the spe- impact of trade openness and trade diversification on carbon emis-
cific methods and implementation strategies utilized (Zhang sions from the trade direction (i.e., import or export), which may result
et al., 2022). Some research suggests that trade diversification can in heterogeneity in the trade-carbon emission relationship. Previous
lead to an increase in carbon emissions through economic growth. studies have mostly ignored this aspect and rarely separated import
Trade diversification can improve a country's terms of trade, especially and export as variables for empirical analysis. Third, the current
in developing countries (Sun et al., 2023). Developing countries often research mainly focuses on the size and direction of the impact of
face constraints in terms of capital and technology, which limit their trade on carbon emissions, with little attention given to the underlying
ability to export beyond primary products, leading to a heavy reliance mechanism of the impact. Understanding the mechanism of the criti-
on basic resources. This over-reliance can cause varying degrees of cal factors that influence the trade-carbon emission relationship is
deterioration in the terms of trade, with negative impacts on trade crucial for the development of rational and effective trade policies.
gains and national economic growth (Mania, 2020). Therefore, to
address these challenges, diversification of export products has been
identified as viable solutions to improving terms of trade, promoting 3 | THEORETICAL FRAMEWORK AND
economic growth, and mitigating carbon emissions (Shahzad, Lv, HY P O T H E S E S
et al., 2021). For IDIV, recent studies have shown that IDIV can have
positive effects on energy and carbon intensity, leading to improve- 3.1 | The overall effect of trade openness and
an et al., 2022).
ments in energy efficiency in OECD countries (Dog trade diversification on carbon emissions
Another research indicates that trade diversification can ultimately
lower carbon emissions through a range of “multiple portfolio At present, an international trade model characterized by the global
effects.” On the one hand, diversifying the types of export products integration of the industrial chain has been formed. Regional or
can cater to the diverse demands of the international market, which national division of labor in product manufacturing has gradually
can reduce the negative impact of external shocks on the country become a global phenomenon across borders. Consequently,
while simultaneously increasing the potential for benefits (Arce pollution-intensive production activities are being outsourced to
et al., 2016). On the other hand, diversifying the export trade struc- countries with weaker environmental regulations (Taylor, 2005).
ture can promote the transformation and upgrading of a country's These countries tend to rely on exporting industrial products, leading
economic and industrial structure, leading to reduced carbon emis- to an increased reliance on fossil fuels, which hinders their energy
sions (Shahzad et al., 2020). Trade diversification can also produce transformation process (Shahbaz et al., 2017). Therefore, this study
“dynamic spillovers,” which can enhance the productivity and compet- believes that trade openness makes it more difficult for countries with
itiveness of enterprises in the global market, ultimately leading to lower levels of environmental regulation to meet the challenge of
technological innovation (Sachs & Warner, 1995). To further explore emission reduction while realizing carbon transfer, and it is difficult to
this phenomenon, Shi et al. undertook a study using provincial panel embark on the path of emission reduction in a short period of time.
data and employed feasible generalized least squares (FGLS), fixed Trade diversification refers to changes in the traded goods or services,
effects (FE), and panel threshold econometric methods to examine the rather than aggregate trade. It can mitigate the impact of international
impact of export product diversification on carbon emissions in China trade shocks and volatility while providing new market opportunities
and its regions. The findings of the study revealed that diversification (Hu et al., 2020). Additionally, trade diversification can assist countries
of export products leads to a significant reduction in carbon emis- that specialize in pollution-intensive manufacturing by reducing trade
sions. Moreover, the study also identified an inverted U-shaped rela- concentration. Consequently, it can decrease the proportion of high-
tionship between carbon emissions and export product diversification carbon-intensive products in the trade product mix and promote
(Shi et al., 2022). In conclusion, the influence of import and EDIV on structural changes in import and export trade (Dogan et al., 2020).
carbon emissions exhibits heterogeneity when considering factors Thus, the first hypothesis is formulated.
such as the transfer of carbon-intensive products in the international
market and changes in reliance on energy-intensive industries. How- Hypothesis 1. Trade openness has a positive impact on
ever, when examining the use of clean technology and the breadth of carbon emissions, and trade diversification has a nega-
product markets, the impact of trade diversification, encompassing tive impact on carbon emissions.
both import and EDIV, remains consistent. Consequently, a compre-
hensive understanding of the environmental implications necessitates
a differentiated analysis of import and EDIV. 3.2 | The scale effect of trade openness on carbon
The relationship between trade and carbon emissions has been emissions
extensively discussed, and three crucial findings can be derived from
the above analysis. First, the relationship between trade and carbon The environmental impact of trade openness is determined by
emissions remains uncertain, and further research is needed, three aspects: scale, technology, and structure effects (Antweiler
WANG ET AL. 881
pez, 1994), which act

et al., 2001; Grossman & Krueger, 1996; Lo According to the hypotheses proposed in this study, Figure 1
in conjunction to influence pollutant discharge (Li, Wang, gives the research framework.
et al., 2021). The scale effect of trade refers to the expansion of
economic scale caused by enhanced market access as a result of
trade liberalization (Meng et al., 2022). It implies that the growth 4 | METHODOLOGY AND DATA
of economic activity and increased consumption levels lead to
increased pollution and depletion of natural resources. Conse- 4.1 | Econometric model
quently, in the absence of other factors, the scale effect of trade
may result in higher carbon emissions. This forms the second The traditional STIRPAT model holds that the environment is influ-
hypothesis of this study. enced by three factors: population, affluence, and technology, which
provides a suitable framework for this study (Dietz & Rosa, 1997).
Hypothesis 2. Trade openness will increase carbon This work examines the impact of trade among OECD and G20 coun-
emissions through scale effect. tries on carbon emissions. Further, population size, energy structure
and urbanization level are used as control variables. Therefore, the
basic econometric model we constructed is shown in Equation (1). In
3.3 | The technology effect of trade openness on order to explore the heterogeneous impact of trade on carbon emis-
carbon emissions sions, we included import and export indicators and trade diversifica-
tion indicators in the basic econometric model, as shown in
The technology effect of trade openness involves the importation of Equations (2)–(5):
advanced production technologies and management practices from
other countries into the host country. These factors are assimilated by CO2i,t ¼ f ðTRADEi,t , POPi,t , URBi,t , ESi,t Þ ð1Þ
the host country and adapted to local conditions to enhance produc-
tion optimization, strengthen environmental management measures, CO2i,t ¼ f ðEXPORTi,t , POPi,t , URBi,t , ESi,t Þ ð2Þ
and improve environmental standards (Grossman & Krueger, 1996).
As a result, the environment in the host country is improved, CO2i,t ¼ f ðIMPORTi,t , POPi,t , URBi,t , ESi,t Þ ð3Þ
especially with regard to the dissemination of low-carbon technolo-
gies, which facilitates cleaner production processes (Chen CO2i,t ¼ f ðEDIVi,t , POPi,t , URBi,t , ESi,t Þ ð4Þ
et al., 2019). Therefore, technology effects can reduce carbon emis-

sions (Hypothesis 3). CO2i,t ¼ f ðIDIVi,t , POPi,t , URBi,t , ESi,t Þ ð5Þ
Hypothesis 3. Trade openness will reduce carbon emis- Among them, CO2 represents carbon dioxide emissions, TRADE
sions through technology effect. represents trade openness, POP represents population growth, URB
represents urbanization level, and ES represents energy structure. I
represent for country and t represents for year. Ordinary least squares
3.4 | The structure effect of trade openness (OLS) is generally used to estimate the parameters and analyze the
on carbon emissions specific impact of trade on carbon emission growth in the above-
mentioned econometric model. However, OLS estimation has two pri-
The structural effect of trade openness suggests that over time, mary limitations. First, when research variables relate to economic
the industrial structure of an economy will change as each country growth, a reverse causal relationship between variables is often
specializes in industries in which it has a comparative advantage observed. Second, endogeneity issues may arise due to measurement
(Cole & Elliott, 2003). The impact of structural effects on a coun- errors and omitted variables. To address these limitations, the instru-
try's environment depends on whether its comparative advantage mental variable (IV) method is commonly employed. Nevertheless,
industry is low-carbon (Wiebe et al., 2012). From a wider perspec- finding suitable instrumental variables can be challenging. An alterna-
tive, the expansion of trade scale may help maintain low-carbon tive approach to minimize the impact of endogeneity is the GMM
industrial structures for countries with a comparative advantage in method, which uses the lagged variables as instrumental variables
low-carbon industries. Conversely, it may be more challenging for (Arellano & Bond, 1991). In this study, the GMM method is utilized to
countries whose comparative advantage is in pollution-intensive construct a dynamic panel model by applying the logarithm function
industries to optimize their industrial structures. Hypothesis 4 is to the Equations (6)–(10):
therefore proposed in this study.
Hypothesis 4. Trade openness will increase carbon LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNTRADEi,t þ α3 LNPOPi,t
emissions through structure effect. þ α4 LNURBi,t þ α5 LNESi,t þ εi,t ð6Þ
882 WANG ET AL.
FIGURE 1 Conceptual framework of this study.
LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNEXPORTi,t þ α3 LNPOPi,t LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNIDIVi,t þ α3 LNPOPi,t

þ α4 LNURBi,t þ α5 LNESi,t þ εi,t ð7Þ þ α4 LNURBi,t þ α5 LNESi,t þ εi,t ð10Þ
LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNIMPORTi,t þ α3 LNPOPi,t

þ α4 LNURBi,t þ α5 LNESi,t þ εi,t ð8Þ Two types of GMM methods are available for dynamic panels:
Difference–GMM and System–GMM (Hansen, 1982). Considering
that if the coefficient of the first-order lag item of the explained vari-
LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNEDIVi,t þ α3 LNPOPi,t
þ α4 LNURBi,t þ α5 LNESi,t þ εi,t ð9Þ able ρ < 0.8, the estimation effect of the Difference–GMM method is
better, so this study chooses the Difference–GMM for estimation
WANG ET AL. 883
LNMEDIAi,t ¼ α0 þ α1 LNTRADEi,t þ α3 LNCONTROLi,t þ εi,t ð12Þ
LNCO2i,t ¼ α0 þ c1 0 LNTRADEi,t þ b0 LNMEDIAi,t þ c2 0 LNCONTROLi,t

þ εi,t
ð13Þ
The estimation equation used to test the effect of trade openness

and intermediary variables fails to incorporate carbon emissions,
thereby the lagging effect of carbon emissions cannot be considered.
In response to this limitation, the current study employs FMOLS esti-
FIGURE 2 Schematic diagram of intermediary mechanism
inspection. mation to estimate the model (Pedroni, 2001). Given that OLS regres-
sion results may be biased and invalid for non-stationary panel data,
FMOLS estimation provides an effective means of reducing finite
(Bond, 2002). For the estimation of Difference–GMM, it is crucial sample bias, obtaining asymptotically unbiased estimators of parame-
to conduct two essential tests: a serial correlation test and an over- ters under endogenous and correlated conditions, and accurately
identification test. To verify whether an over-identification issue is revealing the degree of correlation between variables.
present in the instrumental variables of the model, the Sargan test
must be utilized. Additionally, the normal distribution characteris-
tics of the model error term can be verified through an autocorrela- 4.3 | Variables and data
tion test. Thus, these two tests are necessary for ensuring reliable
and accurate estimations of generalized moments in difference 4.3.1 | Dependent variable
models.
We use the total carbon emissions (CO2) of each country as the
dependent variable. Carbon dioxide emissions are those stemming
4.2 | Mediation effect model from the burning of fossil fuels and the manufacture of cement. They
include carbon dioxide produced during consumption of solid, liquid,
To examine the mediating effects of scale, technology, and structure, and gas fuels and gas flaring. We visualized the data set of carbon
we used the method proposed by Baron and Kenny, which follows a emissions and trade openness in the study interval to reflect the
three-step procedure to examine the mediation relationship (Baron & actual situation of the relationship between carbon emissions and
Kenny, 1986) (shown in Figure 2). Specifically, if M represents an trade openness in each country (see Figure 3).
intermediary variable, the explanatory variable X influences the
explained variable Y through M. Among them, Y ¼ cX þ e1 ,
M ¼ aX þ e2 , Y ¼ c0 X þ bM þ e3 . C represents the total effect of X on Y, 4.3.2 | Independent variable
0
M represents the mediating variable, c represents the direct effect of
X on Y, ab represents the effect of on Y through M, and e1 , e2 , e3 are This study measures trade in two dimensions: trade openness and
error terms. In the first step, X should significantly affect Y when M is trade diversification. Among them, for the description of trade open-
not included in the model. In the second step, X should significantly ness, we selected three independent variables: total trade (TRADE),
affect M when Y is not included in the model. In the third step, M is import (IMPORT), and export (EXPORT). Among them, TRADE is the
added to the model in the first step. M should have a significant effect sum of exports and imports of goods and services measured as a share
on Y, and the significance of X on Y must weaken or become insignifi- of GDP. IMPORT is imports of goods and services represent the value
cant. At this point, if the effect of X on Y becomes insignificant in the of all goods and other market services received from the rest of the
presence of M, the effect of X is said to be “fully” mediated by M; if world. EXPORT is exports of goods and services represent the value
the significance of the effect of X on Y decreases in the presence of of all goods and other market services provided to the rest of the
M, then the effect of X is said to be “partially” mediated by M. If the world. Total trade is the sum of trade imports and trade exports.
above conditions are not satisfied, M has no mediating effect between For the description of trade diversification, we choose two
X and Y. In this study, the equations used in the mediation effect explanatory variables: IDIV and EDIV. More and more literature prove
model of trade openness on carbon emissions are shown in (11)–(13). that trade diversification is one of the potential factors affecting car-
Among them, Equation (11) corresponds to the first step, Equation (12) bon emissions (Ahmad et al., 2021; Lee & Ho, 2022; Liu et al., 2018).
corresponds to the second step, and Equation (13) corresponds to the The trade diversification in this study is measured using the diversifi-
third step. cation index. The diversification index (Equation (14)) is calculated by
measuring the absolute deviation of a country's trade structure from
LNCO2i,t ¼ α0 þ c1 LNTRADEi,t þ c2 LNCONTROLi,t þ εi,t ð11Þ the world structure.
884 WANG ET AL.
FIGURE 3 Trade openness and carbon emission distribution from 1997 to 2019.
P
j hij hi j 2. Level of urbanization (URB): Urbanization affects carbon emissions
i
Sj ¼ ð14Þ through changes in land use and energy consumption patterns
2
(Luqman et al., 2023). On the one hand, urbanization leads to
increased energy consumption due to higher living standards (Li,
Among them, hij ¼ share of product i in total exports or imports Li, & Wang, 2022). On the other hand, urbanization can also pro-
of country or country group j, hi ¼ share of product i in total world mote the development of low-emission service industries. We use
exports or imports. The diversification index takes values between the proportion of urban population to the total population to rep-
0 and 1. The closer the value is to 1, the greater the difference from resent the variable of urbanization level.
the world mode. 3. Energy consumption structure (ES): The relationship between energy
consumption structure and CO2 emissions has been widely
acknowledged (Li, Wang, & Wang, 2022). To achieve carbon neu-
4.3.3 | Control variables and mediating variables trality, it is essential to improve the energy structure by reducing
reliance on fossil fuels (Luderer et al., 2022; Yu et al., 2018). There-
According to the hypotheses in Section 3, we select three variables as fore, we select the proportion of renewable energy consumption
control variables, namely population size, urbanization level, and in total energy consumption as the energy structure variable.
energy structure. In addition, we select three mediating variables, 4. Economic scale (GDP): Trade openness leads to an increase in mar-
namely economic scale, industrial structure, and technological pro- ket access and expansion of economic scale, which is the scale
gress. Economic scale represents the scale effect, industrial structure effect of trade (Meng et al., 2022). The expansion of economic
represents the structural effect, and technological progress represents activities can lead to increased pollution and depletion of natural
the technical effect. We describe each variable in detail below. resources (Wang, Yang, & Li, 2023). Therefore, we use the coun-
try's GDP to represent the economic scale variable.
1. Population (POP): The role of population factors in carbon emis- 5. Industrial structure (IS): Trade openness can cause changes in the
sions has been emphasized in both the traditional IPAT model and industrial structure of an economy as each country focuses on its
the STIRPAT model (York et al., 2003). Changes in population size comparative advantage industries (Cole & Elliott, 2003). From the
and structure have a significant impact on energy consumption perspective of a single country, the actual impact of structural
and carbon emissions (Ribeiro et al., 2019). Therefore, we consider effects on the environment depends on whether the country's
the total population of the country as the population variable in comparative advantage industry is a low-carbon industry (Wiebe
this study. et al., 2012). Therefore, we select the proportion of industrial
WANG ET AL. 885
added value in total GDP to represent the industrial structure 5.3 | Benchmark regression results
variable.
6. Technological progress (RD): Trade openness can promote the trans- The current study employs several empirical regression techniques to
fer of advanced production technology and systematic manage- investigate the relationship between trade openness and carbon emis-
ment experience to the host country. The host country can then sions, including static and dynamic panel models. For panel data esti-
optimize its production methods, enhance environmental manage- mation with cross-sectional dependencies, dynamic panel estimation
ment measures, and improve environmental standards is recommended (Li, Dong, Taghizadeh-Hesary, & Wang, 2022).
(Grossman & Krueger, 1996). This affects the environmental qual- Therefore, a two-step GMM model is used to examine the impact of
ity of the country. Referring to the research of Aleluia Reis et al. trade openness on carbon emissions. The results of the two-step
(2023), Shu et al. (2023), and Zhao et al. (2023), we use the ratio of GMM model are presented in column (1) of Table 3. The model
R&D investment to GDP to represent technological progress. We assumes that the explained variable of an individual is partly depen-
use the ratio of R&D investment to GDP to represent technologi- dent on its previous period value (Baum et al., 2003). Given the strong
cal progress. inertia of carbon emissions, the current year's emissions are affected
by the previous year's emissions. As a result, column (1) uses the
lagged term of the explained variable as an instrumental variable for
4.3.4 | Data sources and descriptive statistics GMM regression. In addition, fixed-effects and random-effects
models are used to test the robustness of the estimates (see columns
In the empirical analysis, we used the OECD and G20 national annual (2) and (3) in Table 3). Columns (2) and (3) are static regressions and
data from 1997 to 2019 to construct a balanced panel model. Due to do not include lagged terms of the explained variables. Column
the lack of data for some countries, our research selected 30 of them. (1) reports the results of the baseline regression. The regression coef-
The list of countries is shown in Table A1. Table 1 shows the defini- ficients of all variables in columns (1)–(3) in Table 3 consistently
tions, units, and sources of the variables. The statistical description of reflect the expected direction of action, indicating the robustness of
the variables is shown in Table A2. the baseline regression results.
The results of the Arellano–Bond serial correlation test indicate
that the p value of AR(2) is above 0.1, indicating the absence of sec-
5 | EMPIRICAL ESTIMATES RESULTS ond-order autocorrelation among variables (Arellano & Bond, 1991).
Furthermore, the Sargan test result surpasses 0.1, signifying the exo-
5.1 | Multicollinearity test results geneity of the selected instrumental variables (Windmeijer, 2000).
Consequently, the study adopts the two-step difference GMM
To ensure the validity and robustness of our regression model, we approach to model the effect of trade on CO2 emissions. The
performed further tests to investigate the potential issue of multi- findings reveal a significant positive effect of trade on carbon emis-
collinearity among the explanatory variables. The variance inflation sions, with every 1% increase in trade leading to a 0.1056% increase
factor (VIF) was utilized as a diagnostic technique to examine the in carbon emissions. This positive effect suggests that the growth
extent of multicollinearity. As shown in Table A3, the results reveal of trade scale within the OECD and G20 countries is accompanied
that all VIF values are below the threshold of 10, indicating that by a certain degree of carbon emission growth. These results
multicollinearity among variables is not a significant concern in our align with the findings of Li et al. who suggested that trade openness
analysis. Hence, we can confidently conclude that our regression could hinder the attainment of carbon neutrality (Li, Ahmad,
results are reliable. et al., 2021).
Control variables show that the population (POP) has a significant
positive effect on CO2 with an effect of 0.1513. The growth in popu-
5.2 | Cross-section dependence test results lation leads to an increase in CO2 emissions resulting from human
activities. On one hand, the increase in population is linked to greater
To address the issue of potential cross-sectional dependence among energy demand, industrial production, land use change, and higher liv-
the experimental variables, we employed four statistical tests, namely ing standards, all of which require energy consumption that leads to
Breusch–Pagan LM, Pesaran scaled LM, Bias-corrected scaled LM, greenhouse gas emissions, particularly CO2 (Alam et al., 2016). On the
and Pesaran CD test, as presented in Table 2. The results of all four other hand, as the population increases, more food and water
tests indicate a significant rejection of the null hypothesis of no cross- resources are needed, which results in more land use and
sectional dependence for all variables, which suggests a notable pres- water resource extraction, and these activities may also result in more
ence of cross-sectional dependence among the experimental vari- carbon emissions (Fan et al., 2021). Therefore, if a country with a large
ables. Such dependence can generate inconsistent estimation results, population aims to achieve the goal of controlling carbon emissions, it
which calls for the incorporation of the cross-sectional dependence is essential to adopt more effective emission reduction measures from
effect in the subsequent regression analysis. multiple perspectives. However, the effect of urbanization (URB) on
886 WANG ET AL.
TABLE 1 Sources and definitions of variables.
Variables Definitions Unit Data source

CO2 CO2 emissions kt WDI (World Bank Open Data, 2023)
TRADE Trade of goods and services (% of GDP) % WDI (World Bank Open Data, 2023)
EXPORT Exports of goods and services (% of GDP) % WDI (World Bank Open Data, 2023)
IMPORT Imports of goods and services (% of GDP) % WDI (World Bank Open Data, 2023)
EDIV International trade diversification index Index UNCTAD (UNCTAD, 2023)
IDIV International trade diversification index Index UNCTAD (UNCTAD, 2023)
POP Population, total People WDI (World Bank Open Data, 2023)
URB Urban population (% of total population) % WDI (World Bank Open Data, 2023)
ES Renewable energy consumption (% of total final energy % WDI (World Bank Open Data, 2023)
consumption)
GDP GDP Constant 2015 US$ WDI (World Bank Open Data, 2023)
IS Industry (including construction), value added (% of GDP) % WDI (World Bank Open Data, 2023)
RD Research and development expenditure (% of GDP) % WDI (World Bank Open Data, 2023)
Abbreviations: UNCTAD, United Nations Conference on Trade and Development; WDI, World development indicators.
CO2 was not significant. This may be due to the complex balance 5.4 | Robustness checks
between resource consumption and low-carbon development in
urbanization (Sun et al., 2022). Urbanization has been shown to Given potential heteroscedasticity and autocorrelation issues, the
lead to higher energy demand and resource consumption (Wang robustness of the regression results needs to be checked. To this end,
et al., 2022). Nevertheless, for OECD and G20 countries, urban green we employ two methods to test the reliability of the results: (1) alter-
development and construction have led to a non-significant effect of native dependent variables; (2) alternative estimation methods.
further urbanization on carbon emissions. This finding contradicts pre- First, we replace carbon emissions with per capita carbon emis-
vious studies (Al-mulali et al., 2013). The impact of ES on CO2 is nega- sions as the explanatory variable for robustness testing, and the
tive, with an effect of 0.0885. This suggests that an increase in the results are shown in Table 4. Columns (1)–(3) show the estimation
proportion of renewable energy in the energy consumption structure results of GMM, fixed-effect OLS and random-effect OLS after the
can facilitate the reduction of carbon emissions. Clean renewable explanatory variables are replaced by per capita carbon emissions,
energy significantly reduces carbon emissions from energy consump- respectively. It is clear that the coefficients of LNTRADE in all regres-
tion compared to traditional fossil energy, and low-carbon energy has sions are consistent with the baseline regressions in significance and
become a widely accepted concept (Chen et al., 2022). Germany and sign. This proves that the results of the baseline regression are robust.
China serve as notable examples of countries that have vigorously In Section 5.2, the results of the CSD test show that our data are
promoted the consumption of renewable energy and achieved cross-sectionally dependent. To this end, we selected the CS-ARDL
remarkable results. Germany's “Energy Transformation” policy, imple- method for robustness testing (Chudik & Pesaran, 2015). The strength
mented since 2000, resulted in a 42.1% proportion of renewable of this approach is that it incorporates cross-section dependence, endo-
energy in the country's total energy consumption by 2019. This geneity, and slope heterogeneity into the assumptions, and is able to
approach led to a reduction in fossil fuel use and a corresponding adequately account for potential cross-section-dependence errors. The
decrease in carbon emissions (Yu et al., 2022). Similarly, China has rap- estimation results of CS-ARDL are shown in Table 5. Among them, the
idly emerged as a major player in the development of renewable error correction term (ECT) measures the adjustment process toward
energy sources. In line with its commitment to sustainable energy, the equilibrium when the long-term relationship between variables devi-
Chinese government has implemented a range of policies and mea- ates. It represents the speed at which variables adjust to restore equi-
sures, including the Renewable Energy Law and the National Energy librium after a shock or disturbance. ECT(1) represents the ECT
Intensive City Pilot Project. These initiatives have been instrumental lagged one period. In this result, the ECT(1) coefficient is significantly
in promoting the consumption of renewable energy and curbing car- negative, indicating that the variable tends to correct deviations from
bon emissions, enabling China to become one of the world's largest long-run equilibrium by adjusting in subsequent periods. In other words,
producers and consumers of renewable energy (Wang, 2022). Finally, this long-run equilibrium converges. Therefore, the results of CS-ARDL
the effect of CO2(1) on CO2 is positive. The growth of carbon emis- are reliable. Both long-term and short-term results, LNTRADE and car-
sions in the previous period has a positive effect on the current carbon emissions are significantly positively associated at the 1% statistical
bon emissions. This means that carbon emissions are significantly level. This is consistent with the baseline regression results. Our results
affected by their own inertia, showing a strong self-cumulative effect. can be considered robust.
WANG ET AL. 887
TABLE 2 Results of cross-sectional dependence.
Test LNCO2 LNTRADE LNEXPORT LNIMPORT LNEDIV LNIDIV

Breusch–Pagan LM 4194.8650*** 5425.0370*** 4832.5540*** 5490.1530*** 2718.8080*** 2398.1630***
Pesaran scaled LM 127.4714*** 169.1781*** 149.0911*** 171.3857*** 77.4283*** 66.5575***
Bias-corrected scaled LM 126.7895*** 168.4963*** 148.4092*** 170.7039*** 76.7465*** 65.8757***
Pesaran CD 21.7971*** 57.2644*** 50.3907*** 57.3187*** 0.5905*** 4.1324***
LNPOP LNURB LNES LNGDP LNIS LNRD
Breusch–Pagan LM 7125.8340*** 7682.5600*** 6473.7270*** 8447.7170*** 3084.7340*** 4153.7650***
Pesaran scaled LM 226.8405*** 245.7153*** 204.7320*** 271.6566*** 89.8344*** 126.0779***
Bias-corrected scaled LM 226.1587*** 245.0335*** 204.0502*** 270.9747*** 89.1526*** 125.3961***
Pesaran CD 16.9498*** 44.5911*** 36.4428*** 91.0487*** 37.0066*** 53.6118***
Note: The significance levels of the regression coefficients are denoted by *, **, ***, representing 10%, 5%, and 1% significance levels, respectively.
TABLE 3 Results of the impacts of TRADE on CO2. estimated coefficients of LNIMPORT and LNEXPORT for CO2 are sig-
GMM Fixed effects Random effects nificantly positive, indicating that an increase in imports and exports
can increase carbon emissions. Specifically, a 1% increase in imports
Variables (1) (2) (3)
and exports will lead to a 0.1060% and 0.0606% rise in carbon emis-
LNCO2(1) 0.6815***
sions, respectively. This finding is supported by previous studies such
41.3132
as Khan et al. (2020) and Shahzad et al. (2017). From 1990 to 2019,
LNTRADE 0.1056*** 0.0625** 0.0704** the total trade volume and imports and exports of various countries
11.2614 2.1851 2.5050 have maintained a similar fluctuation trend, as shown in Figure 3. This
LNPOP 0.1513*** 0.5146*** 0.8737*** may explain why LNTRADE, LNIMPORT, and LNEXPORT have the
3.2955 6.9706 22.7379 same impact on carbon emissions. As the scale of trade expands, the
LNURB 0.0190 1.2961*** 1.1185*** flow of goods and services increases, stimulating economic activity.
0.1082 14.1004 12.9781 This process necessitates the consumption of more resources, which
LNES 0.0885*** 0.2311*** 0.2383*** can result in more carbon emissions.

The present study investigates the relationship between trade
11.8164 -20.9658 22.0720
diversification and carbon emissions. The results of columns (3) and
Constant 2.0240* 7.3696***
(4) in Table 6 reveal that import diversification (LNIDIV) and export
1.7063 10.7158
diversification (LNEDIV) are negatively and significantly associated
R2 .9967 .6481
with carbon emissions. Specifically, an increase in IDIV and EDIV by
AR(2) 0.9862
1% leads to a reduction in carbon emissions by 0.1609% and
Sargan 0.3224
0.0891%, respectively. Previous studies have suggested that expand-
Note: The significance levels of the regression coefficients are denoted by ing trade diversification is not just about increasing the number of
*, **, ***, representing 10%, 5%, and 1% significance levels, respectively. exported products but also about gaining access to higher-quality
The T values are displayed beneath the regression coefficients.
commodity markets (Hausmann et al., 2005). These markets typically
Abbreviation: GMM, generalized method of moments.
demand technology rather than energy, potentially leading to lower
carbon emissions. The results of this study highlight the significance
6 | FURTHER DISCUSSION of promoting trade diversification in mitigating carbon emissions. This
study examines the impact of IDIV and EDIV on carbon emissions
6.1 | Heterogeneity analysis from a trade direction perspective. The results suggest that IDIV has a
greater carbon emission reduction effect than EDIV. Import diversifi-
The trade openness and trade diversification of countries vary consid- cation can increase the abundance and diversity of raw materials from
erably, as illustrated in Figure 4, which can lead to heterogeneous more dispersed sources and diverse trading partners. This can reduce
effects of trade on carbon emissions. As a result, we explore the het- the degree of energy consumption and resource waste during the
erogeneous impact of different trade indicators on carbon emissions production process, leading to lower carbon emissions (De Rosa
after analyzing the influence of trade on carbon emissions. Specifi- et al., 2022). Additionally, IDIV can promote trade and economic
cally, TRADE is subdivided into IMPORT, EXPORT, IDIV, and EDIV. linkages among countries, improving the efficiency of global
We employ a two-step GMM estimation to obtain the results pre- resource utilization and reducing total carbon emissions (Cadot
sented in Table 6. By comparing the coefficients of trade indicators et al., 2013). In contrast, EDIV may intensify competition in interna-
based on columns (1) and (2) in Table 6, it is evident that the tional trade, reduce global resource utilization efficiency, and
888 WANG ET AL.
T A B L E 4 Results of robustness tests with substitution of the imported goods to the EU have become more dispersed, and trading
dependent variable. partners have become more diversified. This has led to changes in
GMM Fixed effects Random effects the EU's energy consumption and economic structure. Studies indi-
cate that the implementation of the EU's IDIV strategy has reduced
Variables (1) (2) (3)
carbon emissions to some extent (Hu et al., 2020). In summary, the
LCO2(1) 0.7838***
heterogeneity analysis shows that trade openness has a positive
43.6447
effect on carbon emissions, and trade diversification has a negative
LNTRADE 0.0916*** 0.0625** 0.0704** effect on carbon emissions, which verifies that Hypothesis 1 pro-
10.4691 2.1851 2.5050 posed in this study was verified.
LNPOP 0.0197 0.4854*** 0.1263***
0.2469 6.5740 3.2860
LNURB 0.0199 1.2961*** 1.1185*** 6.2 | Asymmetric analysis
0.1824 14.1004 12.9781
LNES 0.0904*** 0.2311*** 0.2383*** The present study employs quantile regression to conduct an asym-
metric analysis of the relationship between trade and carbon emis-
8.5530 20.9658 22.0720
sions. Table 7 provide the estimated results of LNTRADE at different
Constant 2.0240* 7.3696***
quantile levels of LNCO2. The quantile regression results for LNIMO-
1.7063 10.7158
PORT, LNEXPORT, LNIDIV, LNEDIV, and LNCO2 are presented in
R2 .9504 .5119
Tables A4–A7. Figure 5 illustrates the differences in the coefficient
AR(2) 0.9918
changes of the main variables across different quantiles. The results
Sargan 0.4047
reveal the presence of asymmetrical effects, whereby the same factor
Note: The significance levels of the regression coefficients are denoted by can have significantly different effects on carbon emissions at differ-
*, **, ***, representing 10%, 5%, and 1% significance levels, respectively. ent quantiles. Specifically, the quantile regression estimation coeffi-
The T values are displayed beneath the regression coefficients.
cients of trade, import, and export for CO2 exhibit similar results, with
Abbreviation: GMM, generalized method of moments.
the estimated coefficients gradually changing from positive to nega-
tive as the quantile increases. Notably, trade, export, and import
TABLE 5 Robustness test results of CS-ARDL estimation. exhibit significant positive correlations at the 10%–50%, 10%–50%,
Variables Coeff Z-statistic Prob and 10%–40% CO2 quantile levels, respectively, while a significant
Short run results negative correlation exists at the 90%, 90%, and 80%–90% CO2 quan-
tile levels. These findings suggest that the expansion of trade scale is
LNTRADE 0.2890*** 3.04 0.002
not conducive to carbon emission reduction at the general level of
LNPOP 1.6855 1.11 0.266
carbon emissions, but it can help reduce carbon emissions at high car-
LNURB 1.4899 0.59 0.556
bon emission levels. Moreover, a comparison of the quantile levels
LNES 0.2968*** 3.27 0.001
with negative correlation shows that the expansion of imports can
ECT(1) 1.3828*** 24.64 0.000
more effectively curb the growth of domestic carbon emissions than
Long run results
exports. Additionally, the impact of trade diversification on carbon
LNES 0.2063*** 2.86 0.004 emissions is consistent, as IDIV and EDIV are significantly negatively
LNPOP 1.2265 1.05 0.292 associated with carbon emissions at any CO2 quantile level. This pro-
LNTRADE 0.2256*** 2.88 0.004 vides further evidence that trade diversification can help mitigate the
LNURB 1.8089 0.89 0.376 growth of carbon emissions. The observed phenomenon can be
explained by the effect of trade diversification, which enables coun-
Note: The significance levels of the regression coefficients are denoted by
*, **, ***, representing 10%, 5%, and 1% significance levels, respectively. tries to transition from product simplification to product diversifica-
Abbreviation: CS-ARDL, cross-sectionally augmented auto regressive tion, broaden the trade of environmentally sustainable products, and
distributed lagged. decrease the utilization of non-renewable energy, ultimately impact-
ing carbon emissions. These results are in agreement with previous
research (Shahzad, Lv, et al., 2021).
weaken the effect of carbon emission reduction. The European
Union (EU), an important member of the OECD, has been imple-
menting an IDIV strategy through various policies and measures. The 6.3 | Mediating effect analysis
EU Trade Policy Strategy, released in 2006, aimed to strengthen
trade relations with developing countries. In 2019, the EU released Table 8 shows the estimated results of mediation effects. Among
the latest version of its trade strategy, which further clarifies its IDIV them, columns (1) and (2) investigate the scale effect of trade on
goals and measures. As a result of these measures, the sources of carbon emissions, aiming to verify Hypothesis 2. Columns (3) and
WANG ET AL. 889
FIGURE 4 Trade openness and trade diversification distribution from 1997 to 2019.
TABLE 6 Results of heterogeneity

Trade openness heterogeneity Trade diversification heterogeneity
analysis.
Variables (1) (2) (3) (4)
CO2(1) 0.7782*** 0.7522*** 0.7779*** 0.7206***
15.8361 13.8426 28.0311 35.3446
LNEXPORT 0.0606***
4.1102
LNIMPORT 0.1060***
8.1546
LNEDIV 0.0891***
5.1074
LNIDIV 0.1609***
10.6520
LNPOP 0.2057** 0.1920** 0.1832*** 0.1793***
2.1012 2.2518 2.8987 4.6784
LNURB 0.0668 0.0061 0.0237 0.3058***
0.3241 0.0286 -0.1505 2.9080
LNES 0.0748*** 0.0896*** 0.0539*** 0.0635***
6.1118 7.8522 4.6152 6.9604
AR(2) 0.1249 0.1256 0.9885 0.9921
Sargan 0.2864 0.2878 0.2188 0.4042
Note: The significance levels of the regression coefficients are denoted by *, **, ***, representing 10%,
5%, and 1% significance levels, respectively. The T values are displayed beneath the regression
coefficients.
890 WANG ET AL.
(4) investigate the technical effects of trade on carbon emissions, aim-
Note: The significance levels of the regression coefficients are denoted by *, **, ***, representing 10%, 5%, and 1% significance levels, respectively. The T values are displayed beneath the regression coefficients.
0.3572***
0.5770***
0.9343***
0.1374***
3.9882***
ing to verify Hypothesis 3. Columns (5) and (6) investigate the struc-
44.0734
5.1097
3.7113
5.6624
4.5242
tural effects of trade on carbon emissions, aiming to test
0.9
Hypothesis 4.
First, it is the test of the mediation mechanism of the scale effect.
According to the results in column (1), there is a significant positive
0.5155***
0.9737***
0.1209***
5.7060***
effect between LNTRADE and LNGDP. However, the results in col-
0.0984
1.1327
4.9015
6.3160
7.3324
56.5114
umn (2) show that after incorporating LNGDP, LNTRADE, and LNCO2
0.8
are still positively associated at the 1% significance level. This shows

that for OECD and G20 countries, economic scale is not a mediator
variable between trade and carbon emissions. Hypothesis 2 is not
0.3182***
0.9970***
0.1218***
5.8986***
valid.
0.0204**
0.6111
4.3638
6.0067
80.5550
12.6297
The second is the test of the mediation mechanism of the tech-
nology effect. According to the result of column (3), there is a signifi-
0.7
cant positive effect between LNTRADE and LNRD. Moreover, the

result of column (4) shows that the significance level of LNTRADE
and CO2 decreases from 1% to 5% after LNRD is included. This shows
0.2800***
1.0154***
0.2027***
6.0337***
that R&D investment has a partial mediating effect on trade and car-
0.0375
1.0086
3.6096
7.1620
60.0180
10.7004
bon emissions. Since the result of (4) shows that there is a significant
0.6
negative effect between LNRD and LNCO2, it indicates that trade can
indirectly reduce carbon emissions by increasing R&D investment.
This occurrence is attributed to the dissemination of low-carbon and
0.0957***
0.3758***
1.0247***
0.2370***
6.8717***
energy-saving technologies, which are facilitated by free trade. This,

2.1679
4.5586
9.0870
47.8640
10.3001
in turn, encourages both trade partners to invest more in green tech-

nologies and R&D, leading to cleaner production (Sebri & Ben-
0.5
Salha, 2014). This phenomenon is known as the technical effect of

trade. Notably, OECD countries, which are among the most devel-
oped economies worldwide and have advanced technology and inno-
0.2364***
0.3386***
1.0314***
0.2445***
7.5342***
vation capabilities, are well-positioned to promote energy efficiency

3.8558
3.9133
40.9397
12.4131
11.1289
and reduce carbon emissions. For instance, by exporting low-carbon

0.4
technologies and equipment, OECD countries can assist other nations

in achieving their emission reduction targets. Additionally, trade activi-
ties can facilitate the exchange and collaboration of knowledge and
0.3502***
0.3345***
1.0430***
0.2667***
8.2584***
technology, which, in turn, promote research and development and

5.0597
10.1917
69.7394
19.0582
15.2642
application of low-carbon technologies, leading to reduced carbon

emissions. To summarize, the results of this study demonstrate that
0.3
trade can facilitate technological progress, thus contributing to a

decrease in carbon emissions. To harness the potential of trade in
Results of the quantile regression model.
reducing carbon emissions, it is imperative to bolster international

0.3464***
0.2996***
1.0338***
0.2839***
7.9857***
technical cooperation and exchanges, as well as encourage innovation

8.6462
3.4943
60.9644
18.7952
10.5586
and the application of low-carbon technologies. Moreover, it is crucial

0.2
to reinforce environmental standards and regulations to achieve sus-

tainable development and green growth and attain global carbon
emission reduction goals. Based on these results, it is evident that
0.1661***
0.9755***
0.3274***
4.7629***
Hypothesis 3 is valid.
3.8554
0.0485
0.4828
5.8392
60.0923
24.3701
Quantiles
The last is the test of the mediation mechanism of the structural

effect. According to the result of column (5), there is a significant posi-
0.1
tive effect between LNTRADE and LNIS. Moreover, the results of col-
umn (6) show that the significance level of LNTRADE and LNCO2
decreased from 1% to 5% after the inclusion of LNIS. This shows that
LNTRADE
Variables
TABLE 7
industrial structure has a partial mediating effect on trade and carbon

LNURB
LNPOP
LNES
emissions. This implies that trade can indirectly affect the level of CO2
C
emissions by altering the industrial structure. According to classical

WANG ET AL. 891
FIGURE 5 Coefficients of quantile regression method on carbon dioxide emission.
trade theory, trade is an external factor that drives changes in the structure and enabling it to reach an advanced level. Since trade activ-
industrial structure in an open economy setting. When adhering to ities are often accompanied by industrial transfers and restructuring,
international comparative interests, trade can act as the fundamental they can affect a country's carbon emission levels. For instance, China
factor in advancing the orderly development of the industrial and India rely on industrial manufacturing and exports to sustain their
892 WANG ET AL.
TABLE 8 Results of the mediating effect of trade and carbon emission.
Explained variables: LNCO2 in (2), (4), (6); LNGDP in (1); LNRD in (3); LNIS in (5)
Variable (1) (2) (3) (4) (5) (6)

LNTRADE 0.4288*** 0.0480*** 0.3883*** 0.0275** 0.0692*** 0.0293**
24.7814 4.0107 15.0265 2.1472 4.8412 2.4380
LNGDP 0.5740***
26.4438
LNRD 0.0272**
2.3503
LNIS 0.4679***
19.9890
LNPOP 0.6999*** 0.4932*** 0.3195*** 0.0098 0.2401*** 0.5670***
15.1350 2.6743 4.6261 0.0490 6.2859 17.5547
LNURB 2.2610*** 0.7870** 1.7614*** 1.2107*** 0.5202*** 1.5375***
39.4032 2.2019 20.5552 3.1486 10.9751 37.2119
LNES 0.0257*** 0.1724*** 0.0647*** 0.2679*** 0.0753*** 0.1978***
3.8185 19.2753 6.4388 29.9786 13.5426 39.8599
R2 .9927 .9996 .9566 .9993 .9087 .9970
Note: The significance levels of the regression coefficients are denoted by *, **, ***, representing 10%, 5%, and 1% significance levels, respectively. The T
values are displayed beneath the regression coefficients.
F I G U R E 6 Mediation effect
mechanisms of trade and carbon
dioxide emission.
economic growth. Their industrial structure is heavily concentrated 7 | C O N C LU S I O N S A N D P O L I C Y

on heavy industry and infrastructure construction with high carbon IMPLICATIONS
emissions. These countries earn foreign exchange income by
exporting products with high carbon emissions, thereby increasing This study investigates the impact of trade on carbon emissions from
carbon emissions. Therefore, the expansion of trade scale may pro- the perspectives of trade openness and trade diversification, using a
mote carbon emissions by elevating the proportion of the second- set of five trade indicators (TRADE, IMPORT, EXPORT; IDIV, EDIV).
ary industry in the industrial structure. Furthermore, the research Empirical estimation is conducted using the balanced panel data from
results support the validity of Hypothesis 4. Based on these results, 30 countries in the OECD and G20 over the period 1997–2019. The
Figure 6 illustrates the mediating mechanism between trade and study also examines the heterogeneous effects of trade openness and
carbon emissions. diversification across different trade directions, as well as exploring
WANG ET AL. 893
asymmetric analysis and mediation mechanisms. Based on these ana- can encourage diversified import sources by reducing import tariffs
lyses, the main conclusions and policy implications are presented. and preferential tax policies. Green procurement policies should be
implemented, prioritizing environmentally friendly and low-carbon
emission goods and services, and encouraging enterprises to produce
7.1 | Conclusions and import such goods. Governments can establish green tariffs that
impose higher tariffs on imported high-carbon-emitting products, and
1. The baseline regression analysis reveals a positive effect between provide reductions or discounts on imported environmentally friendly
trade openness and carbon emissions. Specifically, the findings and low-carbon-emitting products to promote trade diversification.
indicate that a 1% increase in trade openness is associated with an Third, technology progress plays a mediating role in reducing carbon
increase in carbon emissions by 0.1056% for OECD and G20 coun- emissions in the effect of trade openness on carbon emissions. The find-
tries. Additionally, population growth and urbanization have a ings indicate that promoting the improvement of the technical level is an
positive effect on carbon emissions, while renewable energy con- imperative step in achieving green and sustainable development. Specifi-
sumption has a negative effect. cally, the focus should be on encouraging the development of clean
2. The heterogeneity regression analysis reveals that the effect of energy technology, energy-saving technology, and circular economy
trade openness and trade diversification on carbon emissions is technology. The government can facilitate the application and develop-
heterogeneous. Specifically, while trade openness leads to an ment of these technologies through appropriate trade policies or mea-
increase in carbon emissions, trade diversification reduces them. sures. For instance, cross-border cooperation and exchanges of clean
Moreover, when trade direction is taken into account, it is evident technologies can be promoted, and enterprises can be encouraged to
that both imports and exports contribute to carbon emissions, with undertake technological innovation and research and development. By
imports having a stronger effect. Conversely, IDIV and EDIV have means of trade agreements and other mechanisms, globally unified envi-
the opposite effect, reducing carbon emissions, with IDIV having a ronmental standards and norms can be established, and the environmen-
stronger impact. tal protection of global trade can be promoted. Furthermore,
3. The asymmetric analysis reveals that the effect of trade open- environmental taxes or tariffs can be imposed on products with high car-
ness on carbon emissions is asymmetric. At low to medium levels bon emissions, thereby incentivizing companies to reduce production
of carbon emissions (10%–50%), increasing trade openness leads and imports of such products. Finally, enterprises can be encouraged to
to increase carbon emissions, whereas at high levels of carbon participate in the carbon market and promote emission reduction
emissions (80%–90%), increasing trade openness leads to reduce through carbon trading and other means.
carbon emissions. Furthermore, the mediation effect analysis Despite some of the findings and policy implications of this study,
shows that technology effects and structural effects play a medi- there are limitations. First, due to the unavailability of absolute value data
ating role in the relationship between trade and carbon emis- for certain variables, such as R&D investment in countries without infla-
sions. It is worth noting that trade increases carbon emissions tion, the majority of variables in this study are expressed in relative quan-
through structure effect and reduces carbon emissions through tities. This choice is made to minimize the influence of outliers and
technology effects. extreme values, thereby improving the robustness of the regression
model. However, this approach also poses limitations in accurately mea-
suring certain variables, especially technological progress. To address this
7.2 | Policy implications limitation in future research, it is recommended to incorporate a wider
range of absolute value variables to more precisely estimate the impact
The conclusions mentioned above suggest several policy implications. of factors on carbon emissions. Second, this study only uncovers a partial
First, it has been observed that trade openness increases carbon mediation mechanism between trade and carbon emissions. Further
emissions while trade diversification decreases them. This indicates research should select more factors to fully explore the impact mecha-
that trade protectionism is not conducive to carbon neutrality, and nism of trade openness on carbon emissions.
highlights the need for countries to prioritize trade diversification
strategies in their trade policies. Countries must work toward a more ACKNOWLEDG MENTS
multilateral trading system that is open, transparent, and equal. Gov- The authors would like to thank the editor and these anonymous
ernments can contribute to the promotion of trade diversification by reviewers for their helpful and constructive comments that greatly
participating in multilateral trade negotiations, eliminating trade bar- contributed to improving the final version of the manuscript. This
riers, and breaking down trade barriers. Gradual trade liberalization work is supported by the National Natural Science Foundation of
policies should also be adopted, with a view to achieving equal treat- China (No. 72104246).
ment of various types of trade. These measures will help encourage
trade diversification while reducing carbon emissions. CONFLIC T OF INTER E ST STATEMENT
Second, from the perspective of import and export, the improve- The authors declare no known competing financial interests or per-
ment of IDIV is more conducive to carbon emission reduction. There- sonal relationships that could have appeared to influence the work
fore, diversification of import sources is encouraged. The government reported in this paper.
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Country list.
Russian Federation
United Kingdom
Slovak Republic
APPENDIX A
United States
Netherlands
Korea, Rep.
TABLE A1
Argentina
Denmark
Lithuania
Germany
Romania
Hungary
Portugal
Slovenia
Belgium
Bulgaria
Czechia
Turkiye
Mexico
Finland
Austria
Poland
Ireland
France
Latvia
China
Japan
Spain
Israel
Italy
898
WANG ET AL. 899
TABLE A2 Statistical description of

Variables Mean Median Maximum Minimum SD
variables.
LNCO2 11.9791 11.7297 16.1864 8.8436 1.6259
LNTRADE 4.3171 4.3196 5.5308 2.8973 0.5207
LNEXPORT 3.6264 3.6299 4.8515 2.2012 0.5392
LNIMPORT 3.6156 3.6281 4.8236 2.1187 0.5161
LNEDIV 0.8640 0.8617 0.3260 1.4805 0.2420
LNIDIV 1.3277 1.2771 0.8278 2.0545 0.2363
LNPOP 16.9475 16.7241 21.0653 14.4646 1.5287
LNURB 4.2689 4.3014 4.5854 3.4930 0.1878
LNES 2.2559 2.3329 3.8234 0.3909 0.8790
LNGDP 26.8218 26.7011 30.6230 23.3474 1.6154
LNIS 3.2599 3.2691 3.8619 2.8442 0.2126
LNRD 0.2650 0.2909 1.6370 1.2866 0.6905
TABLE A3 Results of the multiple collinearity test.
Variable VIF
LNTRADE 1.5350
LNPOP 1.1632
LNURB 1.2165
NLES 1.4759
900
TABLE A4 Results of the QR model (LNEXPORT).
Quantiles
Variables 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
LNEXPORT 0.1553*** 0.3138*** 0.3327*** 0.2461*** 0.1283*** 0.0544 0.0708** 0.0351 0.3460***
3.6817 8.3711 10.8593 4.9385 2.8515 1.5753 2.0731 0.3459 6.8481
LNURB 0.0584 0.3057*** 0.3358*** 0.3125*** 0.3600*** 0.3076*** 0.4222*** 0.5123*** 0.6678***
0.5745 3.4240 5.0029 3.7564 4.2964 3.8842 5.0567 4.6199 5.5955
LNPOP 0.9724*** 1.0235*** 1.0358*** 1.0290*** 1.0348*** 1.0204*** 1.0134*** 0.9818*** 0.9232***
63.7667 63.1092 75.6933 45.0535 51.2237 64.8103 83.2581 53.6644 67.5007
LNES 0.3229*** 0.2823*** 0.2642*** 0.2404*** 0.2390*** 0.1890*** 0.1233*** 0.1252*** 0.1426***
23.2854 18.0706 19.7000 13.2376 9.3363 6.6173 5.7032 6.1603 7.2363
C 4.5228*** 7.4743*** 7.8381*** 7.2612*** 7.0358*** 6.3003*** 6.7849*** 6.1237*** 4.4569***
5.8304 10.1857 15.8044 13.1033 11.7184 11.9705 13.2487 7.5987 5.9506
TABLE A5 Results of the QR model (LNIMPORT).
Quantiles
Variables 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
LNIMPORT 0.1611*** 0.3304*** 0.3070*** 0.1993*** 0.0247 0.0120 0.0368 0.1498** 0.3409***
3.9233 6.7881 6.8120 2.6828 0.5449 0.3078 0.9880 2.1770 3.8365
LNURB 0.0775 0.2524*** 0.3011*** 0.3272*** 0.3849*** 0.3087*** 0.2927*** 0.5081*** 0.5408**
0.8196 2.6583 4.2875 3.5988 4.7893 4.0673 4.1672 5.5048 2.5547
LNPOP 0.9748*** 1.0302*** 1.0336*** 1.0280*** 1.0017*** 1.0027*** 0.9848*** 0.9637*** 0.9549***
60.0106 51.3085 59.5621 36.5666 41.1487 57.5937 75.9520 62.7646 33.0137
LNES 0.3308*** 0.2946*** 0.2903*** 0.2531*** 0.2375*** 0.2036*** 0.1304*** 0.1179*** 0.1297***
26.0818 18.2709 17.6541 10.9790 9.0691 7.0316 6.3482 6.5772 4.2342
C 4.4830*** 7.4069*** 7.5129*** 7.1018*** 6.1806*** 5.8179*** 5.3338*** 5.4005*** 4.5067***
5.8880 8.5489 12.1365 9.2301 8.7754 10.3703 11.8539 8.8772 4.4216
WANG ET AL.
TABLE A6 Results of the QR model (LNEDIV).
WANG ET AL.
View publication stats

Quantiles
Variables 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
LNEDIV 0.4392*** 0.5367*** 0.4918*** 0.4261* 0.0536 0.0036 0.1563** 0.0785 0.3839***
3.8494 7.4839 6.0433 1.8816 0.3851 0.0408 2.0011 0.9150 4.1551
LNURB 0.0704 0.0453 0.0200 0.1440 0.3854*** 0.3111*** 0.3386*** 0.4759*** 0.6689***
0.6889 0.5401 0.2334 0.8776 4.2983 3.8349 4.2264 4.4555 3.0222
LNPOP 0.9294*** 0.9293*** 0.9249*** 0.9436*** 0.9914*** 0.9980*** 0.9845*** 0.9820*** 1.0091***
98.1779 90.9299 71.2222 30.5068 56.8345 92.3336 101.1818 109.9886 39.7792
LNES 0.2606*** 0.3056*** 0.3121*** 0.2738*** 0.2328*** 0.2033*** 0.1137*** 0.1369*** 0.1579***
8.5099 16.8317 15.9613 9.4255 8.5320 6.9998 5.4807 5.0222 3.6718
C 3.6955*** 3.6745*** 3.5840*** 4.5020*** 5.9742*** 5.7083*** 5.8229*** 6.1542*** 7.5007***
5.6051 7.8368 7.7294 5.2120 11.9432 13.7628 14.6117 14.0763 13.0400
TABLE A7 Results of the QR model (LNIDIV).
Quantiles
Variables 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
LNIDIV 0.6245*** 0.6750*** 0.6719*** 0.6581*** 0.5973*** 0.3987*** 0.2820*** 0.6188*** 0.9450***
8.4683 12.0995 11.7044 9.0274 6.6154 4.5793 4.3279 2.7795 8.8486
LNURB 0.1798*** 0.2644*** 0.1830*** 0.0107*** 0.2296*** 0.3019*** 0.2814*** 0.2185*** 0.2064***
1.2560 3.7656 2.3544 0.1029 2.2637 3.9539 4.0148 2.0898 1.7315
LNPOP 0.1798*** 0.2644*** 0.1830*** 0.0107*** 0.2296*** 0.3019*** 0.2814*** 0.2185*** 0.2064***
54.0619 91.9867 81.0094 61.7553 47.4661 66.4393 106.9125 88.5421 108.7838
LNES 0.2936*** 0.3223*** 0.3193*** 0.3031*** 0.2575*** 0.1944*** 0.1291*** 0.1811*** 0.2112***
12.4465 21.6597 22.9540 17.7129 10.8719 6.6705 6.8557 5.7270 7.1861
C 3.3140*** 2.8648*** 3.2839*** 4.1332*** 5.3811*** 6.2244*** 5.7989*** 6.0126*** 6.5958***
6.2409 8.5750 8.4002 7.4245 8.5512 14.1018 16.7515 15.6963 15.7180
901

Free Trade and Carbon Emissions Revisited: The Asymmetric Impacts of Trade Diversification and Trade Openness

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Free trade and carbon emissions revisited: The asymmetric

Qiang Wang 1,2 | Fuyu Zhang 1 | Rongrong Li 1,2

1 | I N T RO DU CT I O N alone. The World Bank reports that the contribution of international

pez, 1994), which act

et al., 2019). Therefore, technology effects can reduce carbon emis-

FIGURE 1 Conceptual framework of this study.

LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNEXPORTi,t þ α3 LNPOPi,t LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNIDIVi,t þ α3 LNPOPi,t

LNCO2i,t ¼ α0 þ α1 LNCO2i,t1 þ α2 LNIMPORTi,t þ α3 LNPOPi,t

LNMEDIAi,t ¼ α0 þ α1 LNTRADEi,t þ α3 LNCONTROLi,t þ εi,t ð12Þ

LNCO2i,t ¼ α0 þ c1 0 LNTRADEi,t þ b0 LNMEDIAi,t þ c2 0 LNCONTROLi,t

The estimation equation used to test the effect of trade openness

TABLE 1 Sources and definitions of variables.

Variables Definitions Unit Data source

TABLE 2 Results of cross-sectional dependence.

Test LNCO2 LNTRADE LNEXPORT LNIMPORT LNEDIV LNIDIV

LNES 0.0885*** 0.2311*** 0.2383*** can result in more carbon emissions.

TABLE 6 Results of heterogeneity

(4) investigate the technical effects of trade on carbon emissions, aim-

are still positively associated at the 1% significance level. This shows

cant positive effect between LNTRADE and LNRD. Moreover, the

energy-saving technologies, which are facilitated by free trade. This,

in turn, encourages both trade partners to invest more in green tech-

Salha, 2014). This phenomenon is known as the technical effect of

vation capabilities, are well-positioned to promote energy efficiency

and reduce carbon emissions. For instance, by exporting low-carbon

technologies and equipment, OECD countries can assist other nations

technology, which, in turn, promote research and development and

application of low-carbon technologies, leading to reduced carbon

trade can facilitate technological progress, thus contributing to a

reducing carbon emissions, it is imperative to bolster international

technical cooperation and exchanges, as well as encourage innovation

and the application of low-carbon technologies. Moreover, it is crucial

to reinforce environmental standards and regulations to achieve sus-

The last is the test of the mediation mechanism of the structural

industrial structure has a partial mediating effect on trade and carbon

emissions by altering the industrial structure. According to classical

FIGURE 5 Coefficients of quantile regression method on carbon dioxide emission.

TABLE 8 Results of the mediating effect of trade and carbon emission.

Variable (1) (2) (3) (4) (5) (6)

economic growth. Their industrial structure is heavily concentrated 7 | C O N C LU S I O N S A N D P O L I C Y

TABLE A2 Statistical description of

TABLE A3 Results of the multiple collinearity test.

TABLE A4 Results of the QR model (LNEXPORT).

TABLE A5 Results of the QR model (LNIMPORT).

View publication stats

TABLE A7 Results of the QR model (LNIDIV).

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LNES 0.0885* 0.2311* 0.2383*** can result in more carbon emissions.