The effect of trade openness on carbon emissions in Uganda

Abstract

The effect of trade openness on carbon dioxide (CO2) emissions is a controversial subject matter in the existing empirical literature. Whereas some studies found the effect to be positive, others revealed a negative or even insignificant effect. Using the autoregressive distributed lags (ARDL) methodological approach, this study examines the effects of trade openness on CO2 emissions in Uganda. The other variables controlled for in the trade openness – CO2 emissions equation include energy consumption, urbanization, industrialization, and economic growth. The study employed the Augmented Dickey-Fuller and Phillip–Perron tests to examine the unit roots of the series under consideration and the Akaike Information Criteria (AIC) was used to identify the optimal lag length. The ARDL F-bounds test findings confirm the presence of cointegrating relationships among the variables. The ARDL estimation findings show that trade openness has a positive and significant effect on CO2 emissions, both in the short run and long run. Furthermore, the results show that industrialization and energy consumption significantly increase the amount of CO2 emissions in Uganda, both in the short run and long run. However, the study found that whereas urbanization tends to increase CO2 emissions in the short-run, it has a significantly negative effect in the long-run. Similarly, economic growth was found to have a positive effect on CO2 emissions only in the short run. Overall, these findings provide essential insights for policy formulation, emphasizing the importance of strengthening environmental regulations and standards, sustainable industrial practices, clean energy transitions, and effective urban planning in reducing CO2 emissions and mitigating climate change in Uganda. Keywords: Climate Change; Environment and Trade, Environmental Kuznets Curve, Trade openness; Carbon Emissions; ARDL cointegration; Uganda.