Energy Market Integration and Trade Liberalization

Abstract

Energy Market Integration (EMI) has been a goal for many regions, including East Asia, for quite a long time. This study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality using the instrumental pricing variable technique for ASEAN economies. We find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term. Economic integration and trade liberalization in ASEAN had a sustained economic growth over the last several decades. Asia has become the world’s most vibrant region. It maintained an impressive growth rate. Access to large markets allowed Asian countries to utilize their economies of scale on the one hand, and stimulate growth in their productive sectors on the other. With the rise of Asia, it is time for these countries to assist and become an integrated market of their own. Thus, energy is at the center of all issues due to its importance for domestic and international economy and environment. Certain countries that lag behind in energy market integration need to learn from either their past experiences or from other nations and focus their efforts on their relatively weak dimensions. A simple correlation has been used to see the relation between Trade, GDP Growth and other determinants; the results of which shows that there is a Moderate degree of Negative Correlation between trade and GDP growth, a high degree of positive correlation between trade & CO2 emissions and a high degree of positive correlation between GDP growth & CO2 emissions.