Empirical analysis of trade costs and their impact on carbon emissions in RCEP countries.

ABSTRACT

Global economic integration and environmental issues have attracted widespread attention in recent years. As one of the world's most significant free trade agreements, the Regional Comprehensive Economic Partnership (RCEP) significantly impacts trade and the environment. However, research on the relationship between trade costs and carbon emissions still needs to be completed. This study explores the relationship between trade costs and carbon emissions within the framework of the Trade Benefit Theory, which posits that trade liberalization and openness generate economic benefits through increased efficiency, technological advancement, and economic growth. This study analyzes panel data from 12 RCEP countries from 2001 to 2014, employing static and dynamic panel models to examine the relationship between trade costs and carbon emissions. The analysis utilizes mixed regression, fixed (random) effects models, and the systematic GMM method. The results indicate that decreases in trade costs are associated with reduced environmental pollution, aligning with the Environmental Kuznets Curve (EKC) hypothesis, which posits an N-shaped relationship between trade costs and carbon emissions. Implementing RCEP facilitates a decrease in trade-related pollution, suggesting that reducing trade costs can help mitigate environmental pollution. Furthermore, the observed N-shaped EKC for trade costs and carbon emissions highlights the potential of RCEP to reduce the impact of trade-related pollution.