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The Technical Decomposition of Carbon Emissions and the Concerns about FDI and Trade Openness Effects in the United States

Muhammad Shahbaz (), Giray Gözgör (), Philip Adom () and Shawkat Hammoudeh

MPRA Paper from University Library of Munich, Germany

Abstract: This paper decomposes the environmental Kuznets curve into the scale, technique and composition effects while incorporating the roles of energy consumption, trade openness and foreign direct investments (FDI) effects in a carbon emissions function for the United States (U.S.). We have incorporated information about unknown structural breaks into this function while investigating the cointegration between the related variables. The empirical results confirm the existence of cointegration between the variables in the presence of structural breaks. Moreover, the scale effect increases carbon dioxide emissions, but the technique effect reduces it as expected. Energy consumption also adds to carbon emissions, while the composition effect improves environmental quality by lowering carbon dioxide emissions. Further, trade openness decreases carbon dioxide emissions. However, increases in FDI hamper environmental quality by increasing carbon emissions. To reduce the level of carbon emissions, the technical processes of production should be improved by investing in technological innovations and capital stock and upgrading environmental regulations to channel in environment-friendly FDIs. There should also be a transformation of the energy consumption structure towards cleaner energy sources.

Keywords: carbon emissions; scale effect; composition effect; technique effect; international trade; foreign direct investment (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Date: 2019-05-01, Revised 2019-05-07
New Economics Papers: this item is included in nep-bec, nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: The technical decomposition of carbon emissions and the concerns about FDI and trade openness effects in the United States (2019) Downloads
Journal Article: The technical decomposition of carbon emissions and the concerns about FDI and trade openness effects in the United States (2019) Downloads
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