THE LONG-RUN IMPACT OF ENERGY USE, INCOME AND TRADE ON CARBON DIOXIDE EMISSIONS IN MERCOSUR MEMBER STATES

Abstract

Using a heterogeneous panel cointegration analysis, this study examines the long-run impacts of income, trade, and energy use on carbon dioxide emissions (CO2), in Argentina, Brazil, Paraguay and Uruguay between 1970 − 2008. Results show that the long-run impact of those factors on CO2 emissions; particularly trade, changed following the establishment of the Mercosur regional free trade agreement in 1991. The results also suggest that increasing the level of openness, after removing barriers to trade and encouraging investments in transportation infrastructure, created positive effects in the reduction of CO2 emissions post-Mercosur. Our findings indicate that the enhancement and increase in utilization of the region’s inland waterway system could shift the Mercosur’s transport matrix towards more economical transportation modes that generates positive effects on the environment.