The Effect of Trade Openness on Environmental Quality in Southern African Customs Union (SACU) Countries: The CS-ARDL Approach

Enock Gava, Molepa Seabela and Kanayo Ogujiuba ()
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Enock Gava: Centre for Entrepreneurship Rapid Incubator, University of Mpumalanga, Nelspruit 1200, South Africa
Molepa Seabela: Centre for Entrepreneurship Rapid Incubator, University of Mpumalanga, Nelspruit 1200, South Africa
Kanayo Ogujiuba: Centre for Entrepreneurship Rapid Incubator, University of Mpumalanga, Nelspruit 1200, South Africa

Economies, 2025, vol. 13, issue 8, 1-25

Abstract: The Southern African Customs Union (SACU), as a bloc, is compelled to commit to trade in environmentally friendly goods. This study investigated the short-run and long-run relationships between trade openness and environmental quality in the SACU. The Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) approach was applied to the data from 1985 to 2023. The results show that the estimated coefficients of trade openness positively and significantly contribute to carbon emissions in the short run and the long run. The results demonstrate that the gains-from-trade hypothesis does not hold in the SACU. Also, the results indicate that foreign direct investment inflow does not significantly contribute to CO 2 emissions; therefore, the pollution haven hypothesis does not hold. The Dumitrescu–Hurlin Granger non-causality test was employed, and the results show that there is bidirectional causality between CO 2 emissions and trade openness, CO 2 emissions and economic growth, and CO 2 emissions and population growth and no directional causality between foreign direct investment and CO 2 emissions. This study recommends that SACU countries should encourage the trade of eco-friendly goods, which is likely to lessen environmental consequences.

Keywords: environmental quality; trade openness; Southern African Customs Union (SACU) (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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