Long-term Nexus Between Openness,Income, and Environmental Quality

In this paper we examine the dynamic relationship between income, trade, and environmental quality as measured by carbon dioxide (CO₂) emissions, disaggregated by source (oil, gas, and coal). Using time series data spanning from 1980 to 2006, 21 countries, including G7, BRIC, and middle and low income economies, we consistently find the existence of a long-run relationship between income, trade, and carbon emissions (from oil in particular). This is important because the Environmental Protection Agency (EPA) recently determined that CO₂ emissions indeed pose a threat to human health and welfare.