The Impact Of International Trade&Energy Consumption On The Environment Of Developing Economies

The era of Globalization has led to ever-increasing multifaceted factors that affect the environment.The quest for massive economic growth by most countries has fronted huge international trade,and shift in settlements pattern with most of the populace moving to urban areas with better amenities.The massive economic growth,has generated into upsurge in demand for energy and a tumultuous rise in emissions,in most countries.There is,therefore,vast concerns arising from International bodies such as United Nation Framework Convention on Climate Change(UNFCCC),non–profit organization,organised bodies,and individuals,in recent times about the environmental repercussions from the rampage emissions of carbon dioxide.As a result,several researchers are focusing on the linkages among international trade,energy consumption,economic growth,and environmental pollutants in the quest to mitigate environmental pollution.Most of these studies,however,seem to focus more on developed countries.From the global perspective,only few studies have addressed emissions with focus on developing countries,though recent research indicates that about one-third of carbon emission goods produced by most industrialized countries are exported to these developing countries with low stringent environmental regulations.This highly accounts for the growing carbon emissions in these developing countries(IPCC,2014).This study therefore focuses on the developing economies: Ghana and China to provide sufficient contribution on the dynamic linkages among international trade,energy consumption and environmental pollution from the perspective of developing economies.A key reason for such a comparative study is that the developing economy,China has achieved great economic successes in recent years,having resurrected from its once depilated economy some decades ago.China,therefore happens to be the ideal model nation for the less endowed but optimistic developing Africa countries like Ghana to emulate.The prospect of Africa's economic growth is very promising.This comparative study will therefore offer policy recommendations for both countries on how to mitigate environmental pollution as well as be a guide for Africa's optimistic growth whiles using China's economic success as a role model.Our study seeks to achieve the following five specific objectives: Firstly,to test for the validity of Environmental Kuznets Curve theory;secondly,to investigate the causal relationship among international trade,energy consumption,economic growth,and environmental pollution of the economies;thirdly,to investigate the role of trade in mitigating the environmental pollution of developing economies;fourthly,to predict carbon dioxide emission for the next decade,and the fifthly to compare the relationships between Ghana & China regarding the responsiveness of the environment to energy consumption,international trade,and economic growth.To achieve the study aims,our study utilised time series data obtained from the World Bank Indicators for the period 1970-2014.Carbon dioxide(measured by metric tons of carbon dioxide emission per capita)proxied as the environmental pollution was the dependent variable.The independent variables were Economic growth(Real GDP);Export & Import(International Trade);Energy consumption;and urban population.The Quantile preliminary regression test,detected all essential associations,which the traditional ordinary least square failed to capture.Our study revealed carbon dioxide emissions as heterogeneous with conditional distribution.Hence,our study utilised the following up-to-date econometric approaches: Dynamic Ordinary Least Squares(DOLS);Zivot –Andrews structural break unit root test;ARDL Bound testing approach;Bootstrap Granger causality;the Innovative Accounting Approach,Impulse response function,Autoregressive Moving Integrated Average Model(ARIMA),and the Brainstorm Optimisation algorithms(BSO)for better,accurate and thorough analyses and discussions.The stability and the diagnostic tests proved the models in our study,overcome the problem of serial correlation.Our models,also happened to be robust and stable,hence,suitable for econometric analyses and policy recommendation and formulation.The central conclusion from the test of the validity of the EKC is that there is an inverted N-shaped environmental degradation –economic growth relationship for Ghana.The Dynamic Ordinary Least Square established the presence of an inverted N-shaped environmental pollution –economic growth relationship for Ghana under the cubic EKC framework.The results revealed the sign of Y as negative;the square of Y as positive and the cubic Y as negative.All the coefficient were significant.The inverted N-shape relationship can be said to be a leeway period that precedes the traditional inverted U-EKC hypothesis.For the case,of China,there is the presence of an Nshaped Environmental Kuznet Curve.This implies that carbon dioxide emission of China,initially increases with its economic growth and then decrease after reaching a particular turning point of its economic growth.This environmental recovery stage,however seems temporal as beyond a certain income level(economic growth)generates into severe environmental degradation.This Nshape can be said to be an extension of the inverted U-EKC shape as it reveals the potential of a rebound effect leading to severe pollution degradation as the economy advances economically.Results from the structural break tests: Zivot Unit root test and the Gregory Hansen structural cointegration tests confirmed the presence of structural breaks in the times series variables of both Ghana & China.There is also strong evidence suggesting an ever-ongoing massive reform in these developing economies,geared towards boosting the human,social and economic indicators of the wellbeing of the people.To reveal the direction of the causality among international trade,energy consumption,urbanisation and environmental pollution for the developing economies,our study employed both the Conventional and Bootstrapped Granger Causality.The bootstrap granger causality was utilised to reassess the VECM granger causality.Our study run the bootstrap simulation 10,000 times.For the case of Ghana,the bootstrap granger causality reaffirmed the causality for only these three variables: energy consumption,export and urbanisation both in the shortrun and longrun.In the shortrun,our study reaffirmed a uni-directional causality running from energy consumption to export;and urbanisation to export.The innovative accounting approach revealed further that 83.5% of carbon dioxide emission of Ghana is contributed by its own standard innovation shock.The environment of Ghana deteriorates by 0.79,9.45,4.33,0.99 and 0.92% when a one standard deviation change is imputed in economic growth,energy consumption,urbanisation,export,and import respectively.Ghana therefore needs to enforce more appropriate environmental regulations to support ecological-economic development.More public awareness of renewable energy and related research and development of green energy technologies should frantically be pursued.For the case of China,the conventional granger causality revealed the presence of a unidirectional granger causality running from energy consumption(ENC)to economic growth(Y);from import(M)to economic growth(Y);from Imports(M)to Exports(X);and from Urbanisation(URB)to economic growth(Y),Exports(X)and Imports(M)in the shortrun.The bootstrapped approach reaffirmed the VECM Granger causality in the shortrun for only these variables: urbanisation,export and import.The bootstrapped results confirmed the presence of a unidirectional causality running from urbanisation(URB)to export(X),and from urbanisation(URB)to import(M),for the case of China.The Bootstrap method established the presence of long run granger causal relationships among carbon dioxide emission,economic growth,energy consumption,imports,exports and urbanisation.The Innovative accounting approached revealed that 83.98% amount of carbon dioxide emission is provided by its own standard innovation shock.Carbon dioxide emission reacts by 1.18%,2.22%,2.58%,1.74 % and 8.29 % when a one standard deviation change is imputed in economic growth,energy consumption,urbanisation,export,and import respectively.Our study disaggregated trade into its separate individual variables: import and exports;in the quest to explicate their respective impact on environmental pollution,unlike several studies on the energy-trade-economic growth nexus that mostly aggregate trade as the ratio of exports plus imports to GDP.Our findings seem contrary to most researchers that aggregated trade and posit that trade has insignificant effect on environmental pollution of developing economies.The findings of our study revealed that export mitigates the carbon dioxide emission in Ghana.For the case of China,our study revealed that imports positively and significantly contribute to the carbon dioxide emission levels in China.Our study predicted the carbon dioxide emission using these two key models: ARIMA,and BSO.The ARIMA model,predicted carbon emission of Ghana & China for the next decade.From the predicted values it could be observed that there is a continuous increase in carbon dioxide emission for the forecasted period(2015-2027).The carbon emissions of Ghana,though,trails behind that of China over the period,its accelerating rate needs to be checked.Our study revealed that the Brain storm Optimisation algorithm is able to predict accurately even under uncertainty information.Our study based on the hypo variance BSO proved to have a higher and better rate of success in comparison with the original BSO version.The main innovations of the research are as follows:First,though several researchers have attempted to reveal the main factors accounting for environmental degradation,this current study pioneer research that explores how different national context of international trade and energy consumption impact on the environment.Secondly,this study departs from the extant literature in the economic-environmental nexus as this current study incorporated the influence of structural breaks on the trade,energy,economic growth and environmental pollution nexus from the perspective of developing economies.Thirdly,in terms of theory,this paper contributes innovatively by utilising robust and recent econometric approaches to test key hypotheses to provide better statistical inferences;crucial for policy formulation and future reforms on trade,energy,and economic growth of developing economies.These approaches,therefore bore new and deeper insight into the multifaceted factors that affect the environment of developing economies.Fourthly,this study advances the argument for better monitoring and implementation of precise policies tailored specifically for the developing economies: China & Ghana for mitigating the environmental repercussion as the nation economically advances.