Revisiting The Impact of Trade Openness and FDI on CO2 Emissions: Evidence from ASEAN-China FTA Countries

Article Sidebar

PDF
Published: Nov 6, 2025
Keywords:
Trade Openness, Foreign Direct Investment (FDI), CO2 emissions, ACFTA

Main Article Content

Tatik Sumiyati
Kementerian Perdagangan

Abstract

The rise of the economy driven by free trade and foreign direct investment (FDI) has implications for environmental degradation, chiefly due to carbon dioxide (CO2) emissions that may induce the greenhouse effect and subsequently contribute to climate change. Climate change resulting from CO2 emissions is presently a worldwide problem and is one of the Sustainable Development Goals (SDGs). Nonetheless, the correlation between trade openness and FDI inflows regarding CO2 emissions remains inconclusive. This study aims to fill this research gap by revisiting the effect of trade openness and FDI on CO2 emissions using panel data from ASEAN countries from 1990 to 2023, using a fixed effects panel regression approach. The findings indicate that trade openness can raise CO2 emissions, and the impact has grown since the introduction of the ASEAN-China Free Trade Agreement. Policymakers can mitigate the negative effects of trade on carbon emissions by implementing comprehensive carbon pricing mechanisms, promoting green trade, improving FDI regulatory frameworks, fostering regional cooperation, and establishing robust monitoring systems.

Article Details

How to Cite
Sumiyati, T. (2025). Revisiting The Impact of Trade Openness and FDI on CO2 Emissions: Evidence from ASEAN-China FTA Countries. Cendekia Niaga, 9(2), 131–139. Retrieved from https://jurnal.kemendag.go.id/index.php/JCN/article/view/1008
Issue
Vol. 9 No. 2 (2025): Jurnal Cendekia Niaga : Trade and Development Studies
Section
Articles
Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

References

Ahmed, K., Rehman, M. U., & Ozturk, I. (2017). What drives carbon dioxide emissions in the long-run? Evidence from selected South Asian Countries. Renewable and Sustainable Energy Reviews. Elsevier Ltd. https://doi.org/10.1016/j.rser.2016.12.018

Alvi, S., Chaudhry, I., Farooq, F., & Safdar, N. (2019). Trade liberalization, foreign direct investment inflows, environmental quality and economic growth nexus: a comparative analysis of pakistan and china. Review of Applied Management and Social Sciences, 2(1), 17-26. https://doi.org/10.47067/ramss.v2i1.11

Bayar, İ. and Dabakoğlu, M. (2024). How do economic growth, trade openness, and non-renewable and renewable energy affect environmental quality in vista countries?. Economic Journal of Emerging Markets, 63-76. https://doi.org/10.20885/ejem.vol16.iss1.art6

Dietz, T., Rosa, E.A., 1997. Effects of population and affluence on CO2 emissions. P. Natl. Acad. Sci. 94, 175–179. https://doi.org/10.1073/pnas.94.1.175.

Dogan, E., & Turkekul, B. (2016). CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environmental Science and Pollution Research, 23(2), 1203–1213. https://doi.org/10.1007/s11356-015-5323-8

Dou, Y., Zhao, J., Malik, M. N., & Dong, K. (2021). Assessing the impact of trade openness on CO2 emissions: Evidence from China-Japan-ROK FTA countries. Journal of Environmental Management, 296. https://doi.org/10.1016/j.jenvman.2021.113241

Eddine Chebbi, H., Olarreaga, M., & Zitouna, H. (2011). Trade Openness and Co 2 Emissions in Tunisia. Middle East Development Journal, 3(1), 29–53. https://doi.org/10.1142/s1793812011000314

Fang, J., Gozgor, G., Lu, Z., & Wu, W. (2019). Effects of the export product quality on carbon dioxide emissions: evidence from developing economies. Environmental Science and Pollution Research, 26(12), 12181–12193. https://doi.org/10.1007/s11356-019-04513-7

Gözgör, G. (2017). Does trade matter for carbon emissions in oecd countries? evidence from a new trade openness measure. Environmental Science and Pollution Research, 24(36), 27813-27821. https://doi.org/10.1007/s11356-017-0361-z

Hu, X., Pollitt, H., Pirie, J., Mercure, J., Liu, J., Meng, J., … & Tao, S. (2020). The impacts of the trade liberalization of environmental goods on power system and co2 emissions. Energy Policy, 140, 111173. https://doi.org/10.1016/j.enpol.2019.111173

Lv, Z., & Xu, T. (2019). Trade openness, urbanization and CO 2 emissions: Dynamic panel data analysis of middle-income countries. Journal of International Trade and Economic Development, 28(3), 317–330. https://doi.org/10.1080/09638199.2018.1534878

Mahmood, H., Maalel, N., & Zarrad, O. (2019). Trade openness and co2 emissions: evidence from tunisia. Sustainability, 11(12), 3295. https://doi.org/10.3390/su11123295

Meng, C., Li, D., Jin, J., & Cui, L. (2023). The carbon footprint of global trade: assessing the impact of trade liberalization on the carbon emissions of chinese listed companies. Natural Resources Forum, 48(4), 1371-1391. https://doi.org/10.1111/1477-8947.12371

Nurgazina, Z., Ullah, A., Ali, U., Koondhar, M., & Lu, Q. (2021). The impact of economic growth, energy consumption, trade openness, and financial development on carbon emissions: empirical evidence from malaysia. Environmental Science and Pollution Research, 28(42), 60195-60208. https://doi.org/10.1007/s11356-021-14930-2

Prasetyo, A. and Susandika, M. (2022). FDI led growth hypothesis and export led growth hypothesis in ASEAN. E-Journal Ekonomi Bisnis Dan Akuntansi, 9(2), 88. https://doi.org/10.19184/ejeba.v9i2.31602

Safdar, N., Ghaffar, H., Farooq, F., & Liaquat, M. (2020). Trade liberalization, economic growth and environmental quality nexus: an empirical evidence from pakistan. Review of Education Administration and Law, 3(3). https://doi.org/10.47067/real.v3i3.92

Shahbaz, M., Gozgor, G., Adom, P. K., & Hammoudeh, S. (2019). The technical decomposition of carbon emissions and the concerns about FDI and trade openness effects in the United States. International Economics, 159, 56–73. https://doi.org/10.1016/j.inteco.2019.05.001

Shahbaz, M., Solarin, S. A., & Ozturk, I. (2016). Environmental Kuznets Curve hypothesis and the role of globalization in selected African countries. Ecological Indicators, 67, 623–636. https://doi.org/10.1016/j.ecolind.2016.03.024

Shahbaz, M., Nasreen, S., Ahmed, K., & Hammoudeh, S. (2017). Trade openness–carbon emissions nexus: the importance of turning points of trade openness for country panels. Energy Economics, 61, 221-232. https://doi.org/10.1016/j.eneco.2016.11.008

Shahzad, S. J. H., Kumar, R. R., Zakaria, M., & Hurr, M. (2017, April 1). Carbon emission, energy consumption, trade openness and financial development in Pakistan: A revisit. Renewable and Sustainable Energy Reviews. Elsevier Ltd. https://doi.org/10.1016/j.rser.2016.11.042

Shakil, M. (2020). Environmental, social and governance performance and stock price volatility: a moderating role of firm size. Journal of Public Affairs, 22(3). https://doi.org/10.1002/pa.2574

Shuquan, H. (2019). Competition among china and asean-5 in the us market: a new extension to shift-share analysis. Socioeconomic Challenges, 3(4), 129-137. https://doi.org/10.21272/sec.3(4).129-137.2019

Wang, Q., Wang, L., & Li, R. (2023). Trade openness helps move towards carbon neutrality—insight from 114 countries. Sustainable Development. https://doi.org/10.1002/sd.2720

Wang, R. (2023). Trade liberalization and carbon neutralization: a quasi-natural experiment based on china-asean free trade area. Journal of World Economy, 2(2), 33-41. https://doi.org/10.56397/jwe.2023.06.03

Widyawati, R., Hariani, E., Ginting, A., & Mufida, Z. (2021). Effect of economic growth, urban population, trade openness on carbon dioxide emissions in asean-5. Proceeding of the International Seminar on Business Economics Social Science and Technology (Isbest), 1. https://doi.org/10.33830/isbest.v1i.612

Xiang, L., Chen, X., Shu-ling, S., & Yin, Z. (2021). Time-varying impact of economic growth on carbon emission in brics countries: new evidence from wavelet analysis. Frontiers in Environmental Science, 9. https://doi.org/10.3389/fenvs.2021.715149

Zhao, C., Sun, J., Gong, Y., Li, Z., & Zhou, P. (2022). Research on the blue carbon trading market system under blockchain technology. Energies, 15(9), 3134. https://doi.org/10.3390/en15093134