Impacts of export quality on environmental degradation: does income matter?

Abstract

International trade in connection with carbon dioxide (CO₂) emissions has been well studied, but export quality in this context has not widely been considered yet. Hence, in this study, we fill this gap by exploring the effects of export quality, economic growth, urbanization, trade openness, and total energy use on CO₂ emissions in 63 developed and developing countries around the world. To achieve our objectives, we have used the recent techniques of panel quantile estimators as proposed in Powell (2016) and Canay. Econ J 14 (3): 368-386, (2011), along with several other estimation methods. Our overall empirical evidence shows that the existence of the Environmental Kuznets Curve (EKC) hypothesis depends heavily on the estimation method and on the development stage of the economies considered. Emissions are influenced by the same factors as in the EKC specification, as explored in sensitivity analysis. The results from the panel quantile regression model show that economic growth and total energy use are highly CO₂ emissions conducive, while urbanization increases environmental degradation at the higher quantiles, as does export quality, depending on the countries' income levels. Consequently, improvements in export product quality should be prioritized through the production of cleaner products mainly in the lower and upper middle-income countries. There should also be a decrease in total energy use in countries of all income levels. Particularly, policy makers should promote a decrease in export products intensive of fossil fuel energy by prioritizing the use of more renewable energy sources.

Keywords: Environmental Kuznets curve; Export Quality Index; Income levels; Panel quantile regressions; Total energy use; Trade openness.