Effect of Trade Liberalization on Greenhouse Gas Emission in Iran: Application of Nonlinear Asymmetric Cointegration Approach

Document Type : Research Paper


1 assistant professor of agricultural economics, Shiraz university

2 Assistant Professor of Agricultural Economics, College of Agriculture, Shiraz University, Shiraz, Iran


This paper applies nonlinear autoregressive distributed lag (NARDL) model to investigate the nonlinear asymmetric cointegration relationships between trade liberalization and greenhouse gas emission (GHG) in Iran. Also, the methane gas emission per capita was used as greenhouse gas emission index. To this end, annual data from 1982 to 2013 was used. The bounds test of the NARDL specification suggests the presence of co-integration among the variables, which include the methane emission per capita, trade liberalization, energy consumption per capita and GDP per capita. Furthermore, the analysis indicated that there is a long-run asymmetric relationship between trade liberalization and methane emission in Iran. But, the short-run relationship is symmetric. The long-run estimation showed that the positive and negative shocks arising from trade liberalization increase methane emissions by 0.22 and 0.9 percent, respectively. The empirical results revealed that the relationship between methane emission and GDP per capita in long and short run is N-shaped and statistically significant. Also, energy consumption has a significant positive effect on methane emissions and 1 percent increase in per capita energy consumption lead to 0.75 percent growth in methane gas emission.


Agheli, L., Valayi Yamechi, M, Changavar, h., 2011. Study of the Effect of Openness of the Economy on Environmental Damage in Iran, Quarterly Journal Strategic, 19(57), 197-216.
Ang, J. B., 2007. CO2 emissions, energy consumption, and output in France. Energy Policy, 35(10), 4772-4778.
Athanasenas, A., Katrakilidis, C., Trachanas, E., 2014. Government spending and revenues in the Greek economy: Evidence from nonlinear cointegration. Empirica, 41(2), 365-376.
Barghi Oscoyi, M.M., Rasoli Oscoyi, M., Taher Oscoyi, S., 2017. Impact of Globalization of the economy on the environment, fourth national management conference, Economics and Accounting, Tabriz, Iran. (in Persian).
Cole, M., 2006. Does trade liberalization increase national energy use? Economics Letters, 92, 108–112.
Copeland, B. R., Taylor, M. S., 2004. Trade, growth, and the environment. Journal of Economic Literature, 42(1), 7–71.
Dasgupta, S., Hamilton, K., Pandey, K. D., Wheeler, D., 2006. Environment during growth: accounting for governance and vulnerability. World Development, 34(9), 1597–1611.
Dogan, E., Turkekul, B., 2016. CO2 emissions, real output, energy consumption, trade, urbanization and financial development: testing the EKC hypothesis for the USA. Environmental Science and Pollution Research, 23, 1203–1213.
Drabo, A., 2017. Climate change mitigation and agricultural development models: Primary commodity exports or local consumption production? Ecological Economics, 137, 110-125.
Grossman, G.M., Krueger, A. B., 1991. Environmental impacts of a north American free trade agreement. In National Bureau of economic research working paper 3914. Cambridge MA: NBER.
Jafari samimi, A., Gholami, Z., 2016. Effect of economic globalization on environmental sustainability: A comparison of developing and developed countries, Quarterly Journal of Business Research, 75-1-18. (in Persian).
Jena, P. R., Grote, U., 2008. Growth-trade-environment nexus in India. Economics Bulletin, 17, 1–11.
Lee, T.-H., Chang, Y., Park, D., 2016. Trade openness and environmental quality: International evidence. Energy Policy, 92, 45–55.
Ling, C. H., Ahmed, K., Muhamad, R. B., Shahbaz, M., 2015. Decomposing the trade-environment nexus for Malaysia: What do the technique, scale, composition, and comparative advantage effect indicate? Environmental Science and Pollution Research, 22(24), 20131–20142.
Managi, S. 2004. Trade liberalization and the environment: carbon dioxide for 1960-1999. Economics Bulletin, 17(1), 1-5.
Mehrabi Basharabadi, H., Jalani Esfandabadi, A., Baghestani, A. And honorable, H. 2008. The Impact of trade liberalization on environmental pollution in Iran, Iranian Journal of Agricultural Economics and Research, 41 (2), 11-19. (in Persian).
Mobarak, A., Mohammadlu. N., 2010. Investigating the effect of commercial liberalization on greenhouse gas emissions (hypothesis of contamination and environmental curves of Kuznets, Program and Budget, 108, 33-58. (in Persian)
Pesaran M.H., Shin, Y., Smith, R.J. 2001. Bounds testing approaches to the analysis of level relationship. Journal of Application Econometrics, 16, 289-326.
Pesaran, M.H., Shin, Y., 1999. An autoregressive distributed lag modelling approach to cointegration analysis. In: Storm S (ed) Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Chapter 11. Cambridge University Press, Cambridge.
Rudolph, A., Figge, L., 2017. Determinants of ecological footprints: What is the role of globalization? Ecological Indicators, 81, 348-361.
Shahbaz, M., Khan, S., Ali, A., Bhattacharya, M. 2017a. The impact of globalization on CO2 emissions in China. The Singapore Economic Review, 62(04), 929-957.
Shahbaz, M., Mallick, H., Mahalik, M. K., Loganathan, N. 2015. Does globalization impede environmental quality in India? Ecological Indicators, 52, 379-393.
Shahbaz, M., Mallick, H., Mahalik, M. K., Sadorsky, P. 2016. The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development. Energy Economics, 55, 52-68.
Shahbaz, M., Shahzad, S. J. H., Mahalik, M. K., 2017, b. Is globalization detrimental to co2 emissions in Japan? New Threshold Analysis. Environmental Modeling & Assessment, 1-12.
Shin, Y., Yu, B., Greenwood-Nimmo, M., 2011. Modelling asymmetric cointegration and dynamic multiplier in a nonlinear ARDL framework, http: // papers.ssrn.com/ sol3/ papers.cfm? abstract_id=1807745.
Shin, Y., Yu, Greenwood-Nimmo, B., Sickles, M.J., 2014. Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In: Horrace, William, C., Robin, C. (Eds.), Festschrift in honor of peter Schmidt. Springer Science & Business Media, New York (NY).
Tsurumi, T., Managi, S., 2010. Decomposition of the environmental Kuznets curve: Scale, technique, and composition effects. Environmental Economics and Policy Studies, 11(1–4), 19–36.