Human activities have exacerbated global warming through greenhouse gas emissions, traditional energy consumption, land use practices, lifestyles, and consumption trends, impacting regions and nations worldwide. These activities significantly contribute to rising global greenhouse gas levels (IPCC, 2023). Ahmed and Le (2020) contend that human activity is the primary driver of environmental deterioration. In 2015, the United Nations declared that international trade plays a pivotal role in global sustainability by advancing nine environmental sustainable development goals (SDGs) (Xu et al., 2020). International trade not only alleviates regional resource constraints but also stimulates economic growth and enhances social welfare (Steen-Olsen et al., 2012; Blanco and Razzaque, 2009). While the reduction of trade barriers has improved global commerce, spurring economic activity (Buysse et al., 2018) and influencing CO2 emissions (Xie and Wu, 2021), trade expansion can escalate environmental pressures (Mrabet et al., 2021). This, in turn, can negatively impact social well-being due to increased CO2 emissions. Notably, as environmental regulations become more lenient, it is becoming increasingly common for economically disadvantaged nations to serve as global manufacturing hubs (Ahmad, Jabeen, and Wu, 2021), resulting in an environmental and economic development disparity between developed and developing countries. Consequently, the World Trade Organization announced tariff-free treatment for environmental goods to create more equitable opportunities for developing countries.
While some researchers argue that green trade exports (GT exports) can more efficiently reduce greenhouse gas emissions (Li et al., 2022; Liu et al., 2022c; Huang et al., 2020), others hold opposing views (Hu et al., 2020; Wan et al., 2018). Green commodities hold the potential to promote long-term environmental sustainability by reducing energy consumption during the manufacturing process (Paramati et al., 2020). In 2008, the World Bank suggested that green trade is less detrimental to the environment (World Bank, 2008). However, Zugravu-Soilita (2018) asserts that while GT exports may reduce CO2 emissions, they can indirectly increase water contamination. Furthermore, some scholars raise concerns about potential environmental hazards associated with Green Trade (GT) exports, stemming from unforeseen adverse effects in the manufacturing process (Liu et al., 2022a; Wan and Wen, 2017; Wan et al., 2018).
Green total factor productivity (GTFP) serves as a crucial indicator of the quality of economic growth. While several studies have explored the relationship between GT products and the environment, there is limited research on the impact of GT exports on GTFP, as highlighted by Liu et al. (2022a). Environmental factors can potentially hinder GTFP growth in China. However, the negative impact of trade can be mitigated by promoting the equitable distribution of regional resources and strengthening environmental controls. Despite these considerations, there is a scarcity of research on industrialized nations exploring the relationship between GT exports and GTFP. Liu et al. (2023) support the notion that reducing GT barriers can enhance agricultural GTFP, and the scale of agricultural trade can significantly affect agricultural GTFP. Given the dearth of literature on GT trade and GTFP, most studies have only examined linear relationships, leading to limited conclusions.
The purpose of this paper is to investigate the linear relationship between GT exports and GTFP as a baseline model, using data from 37 OECD countries spanning from 2003 to 2016, addressing this research gap. As the second objective, we introduce clean energy and research and development (R&D) as threshold variables to examine the non-linear relationship between GT exports and GTFP. Clean energy and R&D are chosen as threshold variables because of their substantial influence on Green Total Factor Productivity (GTFP) growth. In addition to the GTFP variable, we also assess the impact of GT trade on traditional total factor productivity (TFP), CO2 emissions reduction, and PM2.5. Our empirical results indicate that GT exports impede the development of GTFP and traditional TFP while failing to reduce CO2 and PM2.5 emissions. Notably, when considering clean energy and R&D as threshold variables, they exacerbate the adverse impact on GTFP at the initial threshold stage, but strongly enhance GTFP beyond the first threshold value. The choice of OECD countries is motivated by the fact that most OECD countries are developed nations that prioritize low-carbon research and environmental issues, often offering government financial support (Can et al., 2021b). This choice allows us to examine whether GT exports can promote GTFP development in OECD countries, which is of significant concern to developing nations.
The remainder of this study is organized as follows: Section 2 presents the literature review; Section 3 covers data, GTFP measurement methodology, and the empirical model; Section 4 presents the model findings and discussion; and Section 5 provides the conclusion.