Does trade openness increase CO2 emissions in Africa? A revaluation using the composite index of Squalli and Wilson

Abstract

<title>Abstract</title> The purpose of this study is to provide new evidence on the relationship between trade openness and carbon dioxide (CO2) emissions in Africa. Based on recent data and an uncommon and more informative composite indicator of trade openness proposed by Squalli and Wilson (2011), we use an augmented Stochastic Impact by Regression on Population, Affluence and Technology (STIRPAT) model. Empirical evidence using the Two Stage Least Square estimation (2SLS) validates the “pollution haven” hypothesis and shows that trade openness increases CO2 emissions in Africa. However, the elasticity varies greatly depending on the different measures of trade openness used. Moreover, we find that trade openness is associated with an increase in CO2 emissions in North Africa, South Africa and West Africa, but rather has a negative effect on CO2 emissions in East Africa and in Central Africa. Furthermore, the quantile regression approach shows that the effect of trade openness is increasing on the Q10th, Q25th, Q50th, and Q75th quintiles, but decreasing at the Q90th quintile, thus highlighting the "scale effect". The results obtained are robust even when using other indicators of environmental quality. <bold>JEL classification: </bold>F18; F64; N57; N77; Q56.