The Relationship between Trade Liberalization, Sea Freight, and Carbon-Dioxide Emissions within the Perspective of EKC: The Case of Mexico

Abstract

The main purpose of this research is to investigate the long-term nexus among trade liberalization, sea transportation, economic growth, energy consumption and carbon dioxide emissions by considering the EKC hypothesis for Mexico from 1980 to 2021. In this context, multiple regression, ADF, PP, FMOLS, Bayer-Hanck co-integration tests are employed in order to examine both the effect of independent variables on dependent variables and the long-run relationship. According to results of multiple regression, FMOLS analysis and Bayer-Hanck co-integration test, trade liberalization, sea transportation, economic growth, energy consumption have substantial impact on CO2 emissions and there is a long-run relationship among variables from 1980 to 2021 for Mexico which verifies the EKC hypothesis. All empirical evidence demonstrates that the Mexican government should take radical steps to prevent environmental degradation. The presence of trade liberalization and the positive movement of the ecological footprint reveal the increasing effect of growth on carbon dioxide emissions, especially in a developing country such as Mexico, which aims for more economic growth. All these indicate the necessity of switching to practices aimed at reducing carbon dioxide emissions. In this sense, incentives for renewable energy sources, rate differentiation in motor vehicle tax, and regulations in the tax system for negative externalities are some of the applications that can be done. In addition, public expenditures for green infrastructure such as low-carbon energy production and energy efficiency in public buildings can be increased, investments can be made in R&D studies to support innovation, and activities can be preferred to increase environmental awareness. Besides, there are various sea transport green solutions in order to reduce emissions and pollution in maritime transport. Green energy suggest solutions such as reducing the cruise speed of the ship, reducing the use of fossil fuels, choosing new generation fuel types with cleaner content, increasing energy efficiency, and making a weather-dependent cruise plan.