The Effect of Trade Openness on Environmental Quality in Southern African Customs Union (SACU) Countries: the CS-ARDL Approach

The Southern African Customs Union (SACU), as a bloc, is compelled to commit to trade in environmentally friendly goods. This study investigated the short-run and long-run relationships between trade openness and environmental quality in the SACU. The Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) approach was applied to the data from 1985 to 2023. The results show that the estimated coefficients of trade openness positively and significantly contribute to carbon emissions in the short run and the long run. The results demonstrate that the gains-from-trade hypothesis does not hold in the SACU. Also, the results indicate that foreign direct investment inflow does not significantly contribute to CO2 emissions; therefore, the pollution haven hypothesis does not hold. The Dumitrescu–Hurlin Granger non-causality test was employed, and the results show that there is bidirectional causality between CO2 emissions and trade openness, CO2 emissions and economic growth, and CO2 emissions and population growth and no directional causality between foreign direct investment and CO2 emissions. This study recommends that SACU countries should encourage the trade of eco-friendly goods, which is likely to lessen environmental consequences.