The connectivity of international trade to Malaysia’s carbon emissions

Ng, Yi Hong (2024) The connectivity of international trade to Malaysia’s carbon emissions. Final Year Project, UTAR.

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Abstract

This study examine the relationship between (trade) imports and exports of goods and services, (investment) net inflow of foreign direct investment and (consumption) renewable energy consumption against carbon emission in Malaysia over the period 1990 to 2020. Utilizing Vector Error Correction Model (VECM) and cointegration analysis, the research aims to elucidate the dynamics shaping Malaysia's carbon emissions in the context of its trade activities, investment inflows, and energy consumption patterns. The findings reveal that while exports and imports of goods and services exhibit an insignificant relationship with Malaysia's carbon emissions, FDI inflow exerts a significant positive effect on carbon emissions. This suggests that the influx of foreign investment contributes to the rise in carbon emissions within the Malaysian economy. Conversely, renewable energy consumption demonstrates a significant negative effect on carbon emissions, indicating the potential of sustainable energy sources in mitigating environmental impact. These findings have implications for policymakers and stakeholders seeking to formulate strategies for sustainable development and climate mitigation. This study contributes to a deeper understanding of the complex nexus between trade, investment, energy consumption, and carbon emissions in Malaysia. It highlights the need for integrated policies that promote both economic growth and environmental sustainability in the context of globalization and economic development. Keywords: Malaysia, Exports of goods and services, Imports of goods and services, FDI inflow, Renewable energy consumption

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