From Trade Openness and Income Inequality to Carbon Reductions: Insights into Environmental Outcomes

This paper investigated how trade openness and income inequality jointly shaped carbon outcomes using a panel of 94 countries from 1966 to 2015.On average, greater openness and lower inequality are associated with reduced CO2 emissions; however, their interaction is proved to be positive, suggesting that while trade openness could contribute to lower carbon emissions in relatively equal societies, its benefits diminished and even reversed under high inequality.In addition, heterogeneity analyses revealed stronger elasticities in non-highincome and high-openness subsamples, a statistically significant inequality threshold and effects that intensify at upper CO2 quantiles.Therefore, policy packages that pair trade facilitation with inequality compression and cleantechnology diffusion are likely to be most effective, particularly where inequality and openness are already high.Future research should extend the analysis to consumption-based emissions, sectoral pathways, and institutional moderators to refine the trade-inequality-carbon nexus and its implications for environmental sustainability.