Governing trade: a cross-national study of governance, trade, and CO2 emissions

Research in the environmental political-economic tradition considers what historical, colonial, and neoliberal factors contribute to the unequal exchange of natural resources, pollution, and environmental damage, though less research considers internal impacts of the state on CO2 emissions. This is surprising as previous theory and case study work suggest that the relative strength, power, and governance capabilities of the state can help reduce negative environmental impacts of trade. Thus, in this research, we question if high levels of governance within a nation help reduce CO2 emissions from trade. In this article, we test how trade as a percent of gross domestic product (GDP) and several governance indicators (control of corruption, rule of law, and government effectiveness) on CO2 emissions per capita using two-way fixed effects regression with robust standard errors by country for 136 nations, 1995-2013. To test our hypothesis that governance reduces the detrimental environmental impacts of trade on CO2 emissions, we include interaction terms between each governance measure and trade in our models. Generally, we find that internal state factors can mitigate the impact of international trade on CO2 emissions, which is an important breakthrough given our global necessity for international trade, economic growth, and overcoming climate change.