Do environmental provisions in preferential trade agreements affect climate protection performance?

This article investigates whether the environmental provisions (EP) and climate change provisions (CPs) in preferential trade agreements (PTAs) affect climate change performance. We use an autoregressive panel data model and address endogeneity and reverse-causality using dynamic panel data estimation techniques and instrumental variables. Our analyses are based on panel data covering 57 countries for the period 2007 to 2019. Controlling for scale, composition and technique effects, we find that, ceteris paribus, inclusion of EPs and CPs in PTA has beneficial effects on some measures of climate change performance, though not all. Both EPs and CPs have significant positive effects on overall climate change performance. The effects are primarily driven by gains in the areas such as emissions, renewable energy and climate policy. Moreover, PTAs that have direct climate change provisions (i.e., directly address climate change issues) exert stronger effect on climate change performance than PTAs that either address environmental issues in general or indirectly address climate change issues or both. Thus, it is important that PTAs should include direct climate change provisions if they are to be an effective strategy for mitigating and adapting to climate change. These should be complemented by effective political institutions.