Role of Trade Openness in CO 2 Emissions Convergence: Evidence from BRICS+ Countries

Abstract

The contemporary world’s growing dependence on fossils has resulted in a sharp rise in carbon dioxide (CO₂) emissions, intensifying global climate concerns. In this context, understanding whether countries are converging in their per capita CO₂ emissions (or diverging) is crucial for a policy perspective. A key factor that may influence this process is trade openness. While theory suggests various channels through which trade can either reduce or increase emissions, the overall impact on emissions convergence remains inconclusive due to the complex and often contradictory nature of these mechanisms. This study explores how trade openness affects CO₂ emissions convergence, focusing on the BRICS+ countries, a group of emerging countries with diverse economic and environmental profiles. Using a β-convergence framework and Chudik and Pesaran’s (2015, Journal of Econometrics, 188, 393–420) dynamic common correlated effect mean group model, we investigate both production-based and consumption-based CO₂ per capita emissions. Our results show a clear distinction: trade openness does not significantly impact convergence in production-based CO₂ per capita emissions, but it does have a negative and significant impact on consumption-based CO₂ per capita emissions growth, possibly due to cleaner imports. This suggests that trade affects the emissions tied to what countries consume, rather than what they produce. This highlights the importance of designing trade policies that encourage the flow of low-carbon-intensive goods and services.

JEL Codes: C33, Q58, F1, Q54