Assessing the impact of trade openness on carbon emission intensity: evidence from India
Student name: Ms Pratiksha Chaturvedi
Guide: Prof Kanchan Chopra
Year of completion: 2014
Host Organisation: TERI University
Abstract: Post the trade liberalization in 1991, the stance of policy making in India has been
encouraging to trade. Along with trade in all other commodities, a large and increasing
part of India’s import basket is made by energy imports to meet the energy needs of this
fast growing economy. This trend is accompanied with rising carbon emissions for the
country. However, beginning in early 1990, the carbon emission intensity of the GDP has
been falling for India. This study delves deeper into this interesting trend and attempts to
study the dynamic inter-relationships between carbon emission intensity, economic
growth, trade openness and also incorporates for technological improvements. Using
data from 1974 to 2010, a Vector Autoregressive (VAR) model is estimated and it is found
that changes in carbon emission intensity of the Indian economy depends on its own
lagged values and the lagged values of changes in real GDP per capita. Economic
growth has a seemingly inverted U-shaped relationship with carbon emission intensity.
However, trade openness is not found to significantly impact it. Further testing for
Granger causality, it is observed that two way Granger causality holds between economic
growth and carbon emission intensity and also between economic growth and trade
openness. Thus while trade openness has no direct impact on the carbon emission
intensity of the economy, it has an indirect impact through its relationship with the GDP
which has an impact on carbon emission intensity
