ABSTRACT
While literature on trade flows-climate change interrelationship is quite vast, the empirical evidence does not offer a clear conclusion. Cross-country panel data model evidence indicates that increased outward orientation generally leads
to higher GHG emissions and environmental degradation (Chakraborty and Mukherjee 2013b; Managi and Kumar 2009). In addition to merchandise trade, trade in services can also significantly influence CO2 emissions (Papathanasopoulou 2007). Several country-specific studies have also analysed the relationship between trade and climate change through time series models or case study-based approach. Evidence on emission of methane and other GHGs from agricultural and livestock exports have been noted in both developed and developing countries (Garnett 2011; Gavrilova, Jonas, Erb and Haberl 2010; Kim and Koo 2011; Zaman, Khan, Ahmad and Khilji 2012). A positive relationship between growing merchandise exports and increased CO2 emissions in several developing countries has also been reported (Zhang 2012). The possible trade-emission correlation receives further support from the Pollution Haven Hypothesis (PHH) literature, which argues that FDI inflows in a developing country may target the pollution-intensive sectors, thereby strengthening both the scale and composition effects (He 2006; Merican, Yusop, Noor and Hook 2007).
