International Trade and Environmental Performance in Top Ten-Emitters Countries: The Role of Eco-Innovation and Renewable Energy Consumption

Abstract

The global economy is rising continuously, with a 3-4% aggregate annual growth in output, which poses a severe threat to the environment due to a consistent rise in the use of fossil fuel. Given the disastrous climate change due to the industrialization and increasingly growing demands for energy, countries around the globe are devising strategies to curb the release of greenhouse gases. This study examines the role of environmental innovation, trade, and renewable energy consumption in the nexus between trade and CO2 emissions for top 10 carbon emitter countries. The results suggest that there is evidence of cross-sectional dependency, and models are suffered from slope heterogeneity problem test popularized by Pesaran and Yamagata. The results of Westerlund cointegration method suggest that in there is long equilibrium relationship among CO2 emissions and other variables such as environmental innovation, trade, and renewable energy consumption and income. The results of cross-sectionally augment autoregressive distributed lags (CS-ARDL) method suggest that in the long run, environmental innovation, trade, and renewable energy consumption and income are important factors in explaining consumption-based carbon emission and territory-based carbon emission.