Assessing Trade Openness of Philippines and China and its Environmental Consequences in the Philippine Context

Abstract

Studies on environmental degradation and its association with various drivers of economic growth have received a considerable amount of attention recently; although they resulted in different outcomes, it still greatly contributes to the ongoing debate on environmental-economic literature. Openness to trade is regarded as a key factor of economic growth; however, increased integration of economies worldwide through trade openness has a pertinent effect on environmental quality. Despite its substantial contribution to economic growth, it aggravates the environmental quality, particularly in developing countries. Similarly, the use of energy plays a crucial role in increasing production level of goods and services and stimulating economic growth while posing harm to environmental quality. This study would also like to determine the possibility of enhancing economic growth without deteriorating the environment by harnessing renewable energy sources. It is commonly known that some countries are unwilling to mitigate CO₂ emissions as it can slow down economic growth; hence, potential conflict arises between economic productivity and environmental quality. Accordingly, the study employed ARDL method to determine the linkage between economic growth, trade openness, disaggregated energy consumption (non-renewable and renewable) and its effect on CO₂ emissions in the Philippines. With this, the results confirmed a cointegrating relationship between the underlying variables but yields no presence of the EKC hypothesis.