Abstract:
This paper bridges the gap in the literature by employing the novel quantile-on-quantile
(QQ) approach, the quantile regression approach, and the nonparametric Granger causality test in
quantiles to assess the effect of international trade on consumption-based carbon emissions (CCO2e)
in Uruguay. Our study incorporates other drivers of CCO2 emissions, such as financial development
and renewable energy, into the model. We find that, in the majority of the quantiles, exports, financial
development, and renewable energy exert a negative impact on CCO2e, and the influence of imports
on CCO2e is positive in all quantiles. Moreover, the quantile regression approach is used as a
robustness test for the quantile-on-quantile approach. The causal interaction from the regressors to
CCO2e is evaluated using the nonparametric Granger causality test in quantiles. The outcome of the
nonparametric Granger causality test in quantiles suggests that imports, exports, renewable energy,
and financial development can predict CCO2e at different quantiles. Based on these outcomes, we
recommend that the financial sector must strengthen its focus on giving funding to enterprises that
embrace environmentally friendly technologies and incentivize them to employ other energy-efficient
technologies for manufacturing reasons, thereby preventing environmental deterioration.
