Estimating the trade-environmental quality relationship in SADC with a dynamic heterogeneous panel model

Abstract

The paper revisits the dynamic relationship between trade openness and carbon dioxide (CO2) emissions for member countries of the Southern African Development Community (SADC) over the period 1960-2014. Our approach for SADC is uniquely different from others. For the SADC region, we find that: (i) increased trade openness improves environmental quality; (ii) the scale effect contributes to increase CO2 emissions while the technique effect reduces it, confirming an environmental Kuznets curve (EKC) hypothesis; (iii) the pollution
haven hypothesis (PHH) holds; (iv) the technological innovation, composition effect, financial development, agricultural GDP, service sector GDP and Kyoto Protocol Commitment variable contribute to improve environmental quality; (v) energy consumption, the comparative advantage effect, industrial GDP and
institutional quality deteriorate environmental quality. Our results are generally robust to different estimation techniques. Finally, this research suggests that trade policy should be aligned with other policies aimed at minimising CO2 emissions and promotion of new technologies to improve the region’s environmental quality.