THE ASYMMETRIC IMPACT OF TRADE OPENNESS ON CARBON EMISSIONS IN SOUTH AFRICA

What the paper says

The main aim of this study is to examine the asymmetric impact of trade openness on carbon emissions in South Africa. The study employs the Nonlinear Autoregressive Distributed Lag (NARDL) model using time series data from 1990 to 2020. The findings confirm the existence of an asymmetric relationship between trade openness and carbon emissions. In the long run, both positive and negative shocks to trade openness were found to have no significant impact on carbon emissions. However, in the short run, positive changes in trade openness are negatively associated with carbon emissions, while negative changes have no significant effect. Other results indicate that economic growth and foreign direct investment contribute to an increase in carbon emissions in both the short and long run. Energy consumption is found to increase carbon emissions in the short run, while financial development contributes to a reduction in carbon emissions in the long run. Based on these findings, the study recommends that South Africa should expand its trade openness – particularly in the short run – in order to further reduce its carbon footprint, as increases in trade openness have been found to be associated with lower carbon emissions. It is further recommended that policymakers focus on promoting trade activities that are environmentally safe and sustainable. This can be achieved by promoting the production and importation of environmentally sustainable goods.