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Are free trade agreements good for the environment? A panel data analysis

Author

Listed:
  • Mehdi Nemati
  • Wuyang Hu
  • Michael Reed

Abstract

This study empirically examines the relationship between free trade agreements (FTAs) and greenhouse gas (GHG) emissions. For this purpose, we use three different FTAs: the Southern Common Market, the North American Free Trade Agreement, and the Australia–United States Free Trade Agreement. These FTAs are between developing, both developing and developed, and only developed countries, respectively. Panel unit root, panel cointegration, and fully modified ordinary least squares estimations are employed to examine the long‐run relationship between GHG emissions and trade liberalization. The results indicate that the environmental effects of FTAs depend on the different agreement types. When FTAs are between only developed or developing countries, overall there is no environmental damage, and these types of FTAs can be beneficial for the environmental quality in the long run. However, when developing and developed countries are in a trade agreement, overall environmental quality decreases due to increased GHG emissions.

Suggested Citation

  • Mehdi Nemati & Wuyang Hu & Michael Reed, 2019. "Are free trade agreements good for the environment? A panel data analysis," Review of Development Economics, Wiley Blackwell, vol. 23(1), pages 435-453, February.
    • Handle: RePEc:bla:rdevec:v:23:y:2019:i:1:p:435-453
    DOI: 10.1111/rode.12554
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    Cited by:

    1. Jeremiás Máté Balogh & Tamás Mizik, 2021. "Trade–Climate Nexus: A Systematic Review of the Literature," Economies, MDPI, vol. 9(3), pages 1-19, June.
    2. Zakaria Sorgho & Joe Tharakan, 2022. "Do PTAs with Environmental Provisions Reduce GHG Emissions? Distinguishing the Role of Climate-Related Provisions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(3), pages 709-732, November.
    3. He, Zhifang & Dong, Tianqi & Qian, Wanchuan & Xu, Wei, 2024. "Dynamic interactions among trade policy uncertainty, climate policy uncertainty, and crude oil prices," International Review of Economics & Finance, Elsevier, vol. 95(C).
    4. Xing Yao & Rizwana Yasmeen & Yunong Li & Muhammad Hafeez & Ihtsham Ul Haq Padda, 2019. "Free Trade Agreements and Environment for Sustainable Development: A Gravity Model Analysis," Sustainability, MDPI, vol. 11(3), pages 1-17, January.
    5. Sorgho, Zakaria & Tharakan, Joe, 2022. "Do PTAs with environmental provisions reduce GHG emissions? Distinguishing the effectiveness of climate-related provisions," LIDAM Discussion Papers CORE 2022012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Qi Meng & Muhammad Mohiuddin & Yuliang Cao, 2022. "Sustainable Production Clauses and Positioning in the Global Value Chain: An Analysis of International Investment Agreements (IIA) of the ICT Industry in Developing and Developed Markets," Sustainability, MDPI, vol. 14(4), pages 1-17, February.
    7. Hongbo Liu & Hanho Kim & Justin Choe, 2019. "Export diversification, CO2 emissions and EKC: panel data analysis of 125 countries," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 361-393, June.
    8. Yan, Xiaolei & He, Taiyi & Qian, Pengcheng & Liu, Zhongwen, 2024. "Does the construction of Pilot Free Trade Zones promote the development of green economy? - A quasi-natural experiment evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 208-224.
    9. Panxian Wang & Zimeng Ren & Guanghua Qiao, 2023. "How Does Agricultural Trade Liberalization Have Environmental Impacts? Evidence from a Literature Review," Sustainability, MDPI, vol. 15(12), pages 1-18, June.
    10. Muhlis Can & Jan Brusselaers & Mehmet Mercan, 2022. "The effect of export composition on energy demand: A fresh evidence in the context of economic complexity," Review of Development Economics, Wiley Blackwell, vol. 26(2), pages 687-703, May.
    11. Weber, Heloise & Weber, Martin, 2020. "When means of implementation meet Ecological Modernization Theory: A critical frame for thinking about the Sustainable Development Goals initiative," World Development, Elsevier, vol. 136(C).
    12. Gholamreza Zandi & Muhammad Haseeb, 2019. "The Role of Trade Liberalization in Carbon Dioxide Emission: Evidence From Heterogeneous Panel Estimations," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 228-240, August.
    13. Zakaria Sorgho & Tharakan Joe, 2020. "Do PTAs with environmental provisions reduce emissions? Assessing the effectiveness of climate-related provisions?," Working Papers hal-03004353, HAL.
    14. Avik Sinha & Muhammad Ibrahim Shah & Atul Mehta & Rajesh Sharma, 2022. "Impact of Energy Innovation on Greenhouse Gas Emissions: Moderation of Regional Integration and Social Inequality in Asian Economies," ADBI Working Papers 1304, Asian Development Bank Institute.
    15. Kazem Biabany Khameneh & Reza Najarzadeh & Hassan Dargahi & Lotfali Agheli, 2021. "The Role of Global Value Chains in Carbon Intensity Convergence: A Spatial Econometrics Approach," Papers 2111.00566, arXiv.org.

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