Does Energy Productivity and Technological Innovation Limit Trade-Adjusted Carbon Emissions?

Abstract

The present study aims to examine the effect of energy productivity, international trade, especially by treating exports and imports distinctly with technological innovation and gross domestic product on Consumption-based Carbon emissions for G-7 countries over the period of 1996–2017. This study employed cross-section dependence and slope heterogeneity for evaluating the order of unit root. The cross-sectionally augmented autoregressive distributed lags model (CS-ARDL) is used for evaluating long and short-run relationships among variables; and an augmented mean group and a common correlated mean group test to check for robustness. The findings confirm cointegration relationships with structural breaks (e.g., the 2001 mild recession; the 2008 global financial crisis; the 2011 stock market decline; and the 2014 exports decline in Italy, France, the United Kingdom and Japan) among consumption based carbon emission, energy productivity, exports, imports, gross domestic product, and technological innovation. Further, energy productivity, exports and technological innovation are inversely related to consumption based carbon emission while imports and gross domestic product are positively associated with consumption-based carbon emissions for G-7 countries. The findings recommend the promotion of technological innovation and cleaner production for curbing consumption-based carbon emissions.

Keywords:

• CO₂ Emissions
• G-7 countries
• energy productivity
• technological innovation
• international trade

JEL CLASSIFICATIONS:

• Q53
• Q55
• P33
• P28

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 World Merchandise trade percent to GDP and total World Trade as a percent of GDP are given in Appendix-I

2 Trade as Percentage of GDP for G-7 Countries are given in Appendix-I

3 Thoroughly analyzing the imported products of these countries, in the last five years, the United States mainly imported 30% machines,16% transportation produce, and 9.1% mineral products which is a major share of the total import. For Japan imports of machinery is 25% and minerals 23%, for Germany 27% machinery, 14% transportation products and 12% Chemical products. For U.K, the total imports are led by machines which account for 21%, 16% transportation, 9.7% chemical products and mineral products represent 9% of the total imports. Similarly, France's total imports are led by 22% machinery, 15% transportation, 11% Chemical and 9.9% mineral products. Italy imports mainly contains 18% machinery, 12% Chemical and mineral products, while transportation represents 12% of the total imports. For Canada Imports covers major shares with 24% machines products, 20% transportation products, and 9.5% mineral products 9.5% (Simoes et al.). These figures suggest that majority of products imported by G-7 countries.