Do Trade and Financial Cooperation Improve Environmentally Sustainable Development: A Distinction Between de facto and de jure Globalization

Abstract

The adoption of growth strategies based on foreign trade, especially in the previous century when liberal policies began to dominate, is one of the main reasons for the increase in output and indirectly for environmental concerns. On the other hand, there are complex claims about the environmental effects of liberal policies and thus of globalization. This study intends to analyze the effects of global collaborations involving 11 transition economies that have completed the transition process on the environmentally sustainable development of these nations. In this direction, the effects of financial and commercial globalization indices on carbon emissions are investigated. The distinctions of globalization are used to distinguish the consequences of the two types of globalization. In doing so, the de facto and de jure indicator distinctions of globalization are used to differentiate the consequences of two types of globalization. In addition, the effects of real GDP, energy efficiency, and use of renewable energy on environmental pollution are dissected. For the main purpose of the study, the CS-ARDL estimation technique that allows cross-sectional dependency among observed countries is used to separate the short and long-run influences of explanatory variables. In addition, CCE-MG estimator is used for robustness check. According to the empirical findings, the economic growth and increasing energy intensity increases carbon emissions, but the increase in renewable energy consumption improves environmental quality. Furthermore, trade globalization does not have a significant impact on the environment in the context of globalization. On the other hand, the increase in de facto and de jure financial globalization indices results in an increase in carbon emissions, but de jure financial globalization causes more environmental damage. The harmful impact of de jure financial globalization on environmental quality suggests that the decreasing investment restrictions and international investment agreements of transition countries have been implemented in a manner that facilitates the relocation of investments from pollution-intensive industries to these countries.

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