Assessing the impact of trade openness on CO2 emissions: Evidence from China-Japan-ROK FTA countries

Abstract

After signing the Regional Comprehensive Economic Partnership trade agreement, China became a proposed signatory to another important trilateral free-trade agreement - the China-Japan-South Korea Free Trade Agreement. In the context of the agreement, we explore the potential effect and internal influencing mechanism of trade openness on this region's carbon emissions from 1970 to 2019. We further detect the impact of the agreement by splitting the full sample into two subsamples, one subperiod before the agreement was signed and the other after it was signed. Then we separately analyze the impacts of imports and exports on carbon emissions and find that: (i) Trade openness positively affects the greenhouse effect, and the signing of the agreement can reduce the promotion effect of trade openness on carbon emissions; (ii) imports contribute to increased carbon emissions while exports significantly reduce carbon emissions in a country; and (iii) expanding trade openness not only directly affects carbon emissions directly, but also has indirect impacts by affecting three main effects (i.e., scale effect, technical effect, and structure effect). Finally, several important policy suggestions are provided to mitigate the greenhouse effect and promote high-quality trade openness.

Keywords: Carbon emissions; China-Japan-South Korea Free trade agreement; Heterogeneity analysis; Impact mechanism; Trade openness.