Free Trade Agreements and Environmental Nexus in Pakistan

Salman, Aneel; Sethi, Bakhtawar; Aslam, Faheem; Kahloon, Tahir

doi:10.13169/polipers.15.3.0179

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Policy Perspectives: The Journal of the Institute of Policy Studies

Volume 15, Issue 3

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Free Trade Agreements and Environmental Nexus in Pakistan

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Author(s): Aneel Salman , Bakhtawar Sethi , Faheem Aslam , Tahir Kahloon

Publication date (Print): 1 January 2018

Journal: Policy Perspectives: The Journal of the Institute of Policy Studies

Publisher: Pluto Journals

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Abstract

This study attempts to examine the relationship between Free Trade Agreements (FTAs) and Carbon Dioxide (CO2) emissions in Pakistan. Panel unit root, panel co-integration, and Fully Modified OLS (FMOLS) estimators were employed to investigate the existence of long-run relationship between Gross Domestic Product (GDP), Trade openness (TO) and energy consumption (EC) with CO2 emissions in Pakistan from 1980 to 2014. The results show that GDP per capita have a significant positive effect on CO2 emissions. This implies that an increase in GDP per capita increases CO2 emissions and show a scale effect. The results also indicate the existence of long run positive relationship of energy consumption on carbon emission and negative relationship with trade openness and FTA. This research is helpful for policy makers to eliminate the negative impact by adopting appropriate policy instruments and promote Pakistan's trade in the international market.

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Author and article information

Journal

Journal ID (doi): 10.2307/j50009730

Journal ID (jcode): polipers

Title: Policy Perspectives: The Journal of the Institute of Policy Studies

Publisher: Pluto Journals

ISSN: 1812-1829

ISSN: 1812-7347

Publication date (Print): 1 January 2018

Volume: 15

Issue: 3 ( doiID: 10.13169/polipers.15.issue-3 )

Pages: 179-195

Affiliations

Dr. Aneel Salman is Head of Department, Management Sciences at COMSATS University Islamabad, Pakistan. Bakhtawar Sethi is graduate student at COMSATS University Islamabad, Pakistan. Dr. Faheem Aslam is Assistant Professor at the Department of Management Sciences, COMSATS University Islamabad, Pakistan. Dr. Tahir Kahloon is Assistant Professor at the Department of Government and Public Policy, National Defence University in Islamabad, Pakistan.

Article

Publisher ID: polipers.15.3.0179

DOI: 10.13169/polipers.15.3.0179

SO-VID: 14b3f9b7-1e9a-4e77-8398-e343a66c9e56

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ScienceOpen disciplines: Education,Religious studies & Theology,Social & Behavioral Sciences,Law,Economics

Bibliography

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Antweiler, Werner, Brian R. Copeland, and M. Scott Taylor. “Is free trade good for the environment?” American Economic Review 91, no. 4 (2001): 877-908.
Bagwell, Kyle, and Robert W. Staiger. “The WTO as a mechanism for securing market access property rights: implications for global labor and environmental issues.” Journal of Economic Perspectives 15, no. 3 (2001): 69-88.
Bahmani-Oskooee, Mohsen, Misbah Nosheen, and Javed Iqbal. “Third-Country Exchange Rate Volatility and Pakistan-US Trade at Commodity Level.” The International Trade Journal 31, no. 2 (2017): 105-129.
Cole, Matthew A. “Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages.” Ecological Economics 48, no. 1 (2004): 71-81.
de Miguel, Carlos, Raúl ORyan, Mauricio Pereira, and Bruno Carriquiri. “Energy shocks, fiscal policy and CO2 emissions in Chile.” (2006).
Farhani, Sahbi, and Ilhan Ozturk. “Causal relationship between CO2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia.” Environmental Science and Pollution Research 22, no. 20 (2015): 15663-15676.
Frankel, Jeffrey A., and Andrew K. Rose. “Is trade good or bad for the environment? Sorting out the causality.” Review of Economics and Statistics 87, no. 1 (2005): 85-91.
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SURVEY, P. E. 2009. Economic Survey of Pakistan, Finance Division, Government of Pakistan.
Yu, Tun-Hsiang, Man-Keun Kim, and Seong-Hoon Cho. “Does Trade Liberalization Induce More Greenhouse Gas Emissions? The Case of Mexico and the United States Under NAFTA.” American Journal of Agricultural Economics 93, no. 2 (2010): 545-552.
Zhang, S., Liu, X. & Bae, J. 2017. Does trade openness affect CO2 emissions: evidence from ten newly industrialized countries? Environmental Science and Pollution Research, 1-10.

Comments

Comment on this article

[1] Ahmed, Khalid, and Wei Long. “An empirical analysis of CO2 emission in Pakistan using EKC hypothesis.” Journal of International Trade Law and Policy 12, no. 2 (2013): 188-200.

[2] Antweiler, Werner, Brian R. Copeland, and M. Scott Taylor. “Is free trade good for the environment?” American Economic Review 91, no. 4 (2001): 877-908.

[3] Bagwell, Kyle, and Robert W. Staiger. “The WTO as a mechanism for securing market access property rights: implications for global labor and environmental issues.” Journal of Economic Perspectives 15, no. 3 (2001): 69-88.

[4] Bahmani-Oskooee, Mohsen, Misbah Nosheen, and Javed Iqbal. “Third-Country Exchange Rate Volatility and Pakistan-US Trade at Commodity Level.” The International Trade Journal 31, no. 2 (2017): 105-129.

[5] Cole, Matthew A. “Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages.” Ecological Economics 48, no. 1 (2004): 71-81.

[6] de Miguel, Carlos, Raúl ORyan, Mauricio Pereira, and Bruno Carriquiri. “Energy shocks, fiscal policy and CO2 emissions in Chile.” (2006).

[7] Farhani, Sahbi, and Ilhan Ozturk. “Causal relationship between CO2 emissions, real GDP, energy consumption, financial development, trade openness, and urbanization in Tunisia.” Environmental Science and Pollution Research 22, no. 20 (2015): 15663-15676.

[8] Frankel, Jeffrey A., and Andrew K. Rose. “Is trade good or bad for the environment? Sorting out the causality.” Review of Economics and Statistics 87, no. 1 (2005): 85-91.

[9] Grossman, Gene M., and Alan B. Krueger. “Economic growth and the environment.” The Quarterly Journal of Economics 110, no. 2 (1995): 353-377.

[10] Grossman, Gene M., and Elhanan Helpman. “Trade, knowledge spillovers, and growth.” European Economic Review 35, no. 2-3 (1991): 517-526.

[11] Grossman, Gene M., and Elhanan Helpman. “Trade, knowledge spillovers, and growth.” European Economic Review 35, no. 2-3 (1991): 517-526.

[12] BANK, W. World Development Indicator, World Bank Report (2016).

[13] Halicioglu, Ferda. “An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey.” Energy Policy 37, no. 3 (2009): 1156-1164.

[14] Irshad, M. S. 2015. One Belt and One Road: Dose China-Pakistan Economic Corridor Benefit for Pakistan's Economy?

[15] Kellenberg, Derek K. and Ahmed Mushfiq Mobarak. “Does rising income increase or decrease damage risk from natural disasters?” Journal of Urban Economics 63, no. 3 (2008): 788-802.

[16] Kohler, Marcel. “CO2 emissions, energy consumption, income and foreign trade: A South African perspective.” Energy Policy 63 (2013): 1042-1050.

[17] Kreft, S., D. Eckstein, L. Junghans, C. Kerestan, and U. Hagen. “GLOBAL CLIMATE RISK INDEX 2016: Who Suffers Most From Extreme Weather Events? Weather-related Loss Events in 2014 and 1995 to 2014. Briefing paper. Germanwatch eV, dezembro de 2015. Cf.” (2015).

[18] Kuznets, Simon. “Economic growth and income inequality.” The American Economic Review 45, no. 1 (1955): 1-28.

[19] Lehmann, Sibylle H., and Kevin H. O'Rourke. “The structure of protection and growth in the late nineteenth century.” Review of Economics and Statistics 93, no. 2 (2011): 606-616.

[20] Levin, Andrew, Chien-Fu Lin, and Chia-Shang James Chu. “Unit root tests in panel data: asymptotic and finite-sample properties.” Journal of Econometrics 108, no. 1 (2002): 1-24.

[21] Liu, Zhaoyang, Xianqiang Mao, Wei Tang, Tao Hu, and Peng Song. “An assessment of China-Japan-Korea Free Trade Agreement's economic and environmental impacts on China.” Frontiers of Environmental Science & Engineering 6, no. 6 (2012): 849-859.

[22] Muhammad, Shahbaz, Hooi Hooi Lean, and Shahbaz Shabbir Muhammad. “Environmental Kuznets curve and the role of energy consumption in Pakistan.” (2011): 1-33.

[23] Murthy, KV Bhanu, and Sakshi Gambhir. “International trade and foreign direct investment: empirical testing of the trade–environment triangle.” Transnational Corporations Review 9, no. 2 (2017): 122-134.

[24] Omri, Anis, Saida Daly, Christophe Rault, and Anissa Chaibi. “Financial development, environmental quality, trade and economic growth: What causes what in MENA countries.” Energy Economics 48 (2015): 242-252

[25] Ozcan, Burcu. “The nexus between carbon emissions, energy consumption and economic growth in Middle East countries: a panel data analysis.” Energy Policy 62 (2013): 1138-1147.

[26] Pedroni, Peter. “Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis.” Econometric Theory 20, no. 3 (2004): 597-625.

[27] Pesaran, M. Hashem, Yongcheol Shin, and Richard J. Smith. “Bounds testing approaches to the analysis of level relationships.” Journal of Applied Econometrics 16, no. 3 (2001): 289-326.

[28] Pesaran, M. Hashem, Yongcheol Shin, and Ron P. Smith. “Pooled mean group estimation of dynamic heterogeneous panels.” Journal of the American Statistical Association 94, no. 446 (1999): 621-634.

[29] Saboori, Behnaz, Jamalludin Bin Sulaiman, and Saidatulakmal Mohd. “An empirical analysis of the environmental Kuznets curve for CO2 emissions in Indonesia: the role of energy consumption and foreign trade.” International Journal of Economics and Finance 4, no. 2 (2012): 243.

[30] Saidi, Kais, and Mounir Ben Mbarek. “The impact of income, trade, urbanization, and financial development on CO 2 emissions in 19 emerging economies.” Environmental Science and Pollution Research 24, no. 14 (2017): 12748-12757.

[31] Selden, Thomas M., and Daqing Song. “Environmental quality and development: Is there a Kuznets curve for air pollution emissions?” Journal of Environmental Economics and management 27, no. 2 (1994): 147-162.

[32] Shahbaz, M. 2012. Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan. Economic Modelling, 29, 2325-2339.

[33] Stoessel, Marcel. “Trade liberalization and climate change.” The Graduate Institute of International Studies, Geneva (2001).

[34] SURVEY, P. E. 2009. Economic Survey of Pakistan, Finance Division, Government of Pakistan.

[35] Yu, Tun-Hsiang, Man-Keun Kim, and Seong-Hoon Cho. “Does Trade Liberalization Induce More Greenhouse Gas Emissions? The Case of Mexico and the United States Under NAFTA.” American Journal of Agricultural Economics 93, no. 2 (2010): 545-552.

[36] Zhang, S., Liu, X. & Bae, J. 2017. Does trade openness affect CO2 emissions: evidence from ten newly industrialized countries? Environmental Science and Pollution Research, 1-10.