Can Trade Openness Foster a Greener Future? Evidence from APEC Economies on Macroeconomic Drivers of Environmental Sustainability

This study investigates the dynamic effects of trade openness, income level, renewable energy consumption, and R&D expenditure on environmental degradation in 16 selected Asia-Pacific Economic Cooperation (APEC) member countries over the period 1990–2023. Using total greenhouse gas emissions (GHG) per capita as a comprehensive measure of environmental degradation, the analysis incorporates FDI, industrialization, and urbanization as control variables to account for broader macroeconomic and structural influences. This study employs a robust econometric framework including Prais–Winsten regression, Panel-Corrected Standard Errors (PCSE), Random Effects Generalized Least Squares (RE-GLS), and Robust Least Squares (RLS) estimation models. The empirical results reveal that trade openness has a mitigating effect on greenhouse gas emissions, suggesting that increased trade may promote cleaner technologies and encourage more environmentally friendly production processes within APEC economies. In contrast, income level and industrialization are found to significantly lead to environmental degradation, while renewable energy consumption exhibits a consistent and significant negative relationship with GHG emissions. R&D expenditure highlights the role of innovation in reducing emissions in the RLS estimation, but its effect remains model-dependent. Moreover, Granger causality results conclude the bidirectional relationships between most variables and environmental degradation. These results underscore the importance of integrated policies that promote renewable energy, green industrial strategies, and sustainable trade practices. This study offers empirical insights into environmental governance in the APEC region and contributes to the evolving discourse on balancing economic development with ecological sustainability.