Trade Openness and Carbon Productivity Across Climate Policy Conditions: A Specification-Sensitivity Analysis
DOI:
https://doi.org/10.65150/EP-jefrr/V2E8/2026-06Keywords:
Carbon productivity, climate policy stringency, consumption-based emissions, panel data, trade opennessAbstract
The environmental consequences of international trade may depend on the domestic policy conditions under which trade takes place. This study examines whether the relationship between trade openness and carbon productivity varies across climate-policy conditions using annual panel data for 49 economies over 2010–2023. In the principal economy and year fixed-effects specification, the interaction between trade openness and one-year-lagged climate policy stringency is positive and statistically significant. However, the positive trade association is statistically distinguishable from zero only in the upper part of the observed policy distribution, covering about 11% of country-year observations. More demanding specifications provide substantially weaker evidence. Economy-specific trends eliminate the positive interaction, while a future-policy placebo remains significant, raising concerns about temporal identification. First-difference results are also specification-sensitive, and richer institutional and structural controls attenuate the estimate. The interaction is not reproduced consistently across alternative trade measures, consumption-based hard tests, or a denominator-free specification. Overall, the positive conditional association identified in the principal fixed-effects framework does not survive the majority of the more demanding dynamic, structural, and measurement specifications. The evidence therefore does not establish a robust or causal relationship between trade openness, climate policy stringency, and carbon productivity.
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Copyright (c) 2026 Nguyen Thi Mai Phuong (Author)
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