Revisiting Triangle of Trade-Growth and Pollution for Middle-Income Transitions

Abstract

The focus of this analysis is to explore the empirical association of environmental degradation as a consequence of energy, economic growth, and trade along with the population in perspective for carbon dioxide pollution emissions. Firstly, the panel unit root and Cross-sectional Augmented Dickey-Fuller (CADF) tests show mixed integration for the 27 middle-income nations during 1990-2020. The Pedroni and Kao panel cointegration tests confirm the long-run association. The estimated econometric results by panel GMM, Panel ARDL, and Dynamic Fixed Effect (DFE) shows a positive association of population density, GDP, energy demand (use/consumption) and openness of trade to environment degrading indicator (i-e CO2 emissions). The econometric results infer that middle-income nations are in the developing stages that require increasing economic activities and export earnings, which in turn uses carbon-intensive fuel industries that compromise environmental quality. Moreover, the Pairwise Dumitrescu Hurlin Panel Causality test exhibits that CO2 pollution emissions are granger caused by energy demand, population density, and GDP, while uni-directional relation is running from energy demand to GDP and CO2 emissions to trade openness. This study suggests the global policy framework cleaner technologies, renewable energy resources, and implementation of environmental taxes e.g. Green taxes and subsidies to environmental goods that are required at top priority to limit environmental degradation.