Tariffs, FDI, and tourism drive transport CO2 emissions: evidence from SCO countries

Abstract The Shanghai Cooperation Organization (SCO) includes fast emerging member states with their trade, investment and industrial policies affecting trans boundary ecosystem. The study examines how tariff laws, tourism, direct foreign investment, industrialization, and inflation affect CO 2 emissions in the transport sector in the SCO members from 1994 to 2024. The study is the first inclusive analytical research of tariff regimes on transport CO 2 emissions in SCO countries using principal component analysis, dynamic panel autoregressive distributed lag-error correction mechanism and kernel regularized least squares models as one unified analytical model. There is a relationship between FDI, ITA, TRM, TRA, and CO 2 emissions that are in equilibrium in the long term, and that CO 2 emissions are highly persistent. Despite the fact that it decreases over time, FDI reduces the CO 2 emissions; however, industrialization is the most prevalent source of CO 2 emission. The causative effects of ITA on CO 2 emissions are more pronounced in the medium- and long-run, though the short-term effects depend on the individual policies. TRA affects tourism in China positively whilst negatively affecting tourism in India and Pakistan; however, the opposite is true of TRM. The study also enhances to the trade-environment theory by showing that the tariff mechanisms toil through assorted channels and so contest the assumption of a uniform impact of the tariffs. Instead of limiting the flow of investments in the SCO countries, policymakers should offer special relief on tariffs and focus on FDI as the way to facilitate transfer of clean technology.