Open Access Journal Article

How Does Green Trade Affect the Environment? Evidence from China

by Huiling Liu a orcid ,  Heng Lei b,* orcid  and  Youcheng Zhou c orcid
a
School of Economics, Huazhong University of Science and Technology, Wuhan, China
b
School of Management, Huazhong University of Science and Technology, Wuhan, China
c
Department of Accounting, Southampton Business School, University of Southampton, Southampton, UK
*
Author to whom correspondence should be addressed.
JEA  2022, 2; 1(1), 2; https://doi.org/10.58567/jea01010001
Received: 8 August 2022 / Accepted: 11 September 2022 / Published Online: 13 September 2022
View Full-Text
Download PDF

Abstract

This study focuses on the impact of trade in environmental goods (green trade) on the environment. We found that green trade can decrease pollution levels by exploiting a panel of 277 Chinese cities from 2004 to 2013 and using the instrumental variable (IV) strategy. However, total trade openness is far less favorable to the environment. We also found that both green imports and exports are conducive to the Chinese environment, while ordinary green trade performs better than green processing trade. Nevertheless, the effects of green trade are restricted by a city's purchasing power and absorptive capacity, as well as the classifications of environmental goods. Furthermore, green trade mainly promotes local green technological progress to benefit the environment.

Keywords: Green trade; Environmental pollution; Green imports; Green exports; Instrumental variable;
Copyright: © 2022 by Liu, Lei and Zhou. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
Show Figures

Share and Cite

ACS Style
Liu, H.; Lei, H.; Zhou, Y. How Does Green Trade Affect the Environment? Evidence from China. Journal of Economic Analysis, 2022, 1, 2. https://doi.org/10.58567/jea01010001
AMA Style
Liu H, Lei H, Zhou Y. How Does Green Trade Affect the Environment? Evidence from China. Journal of Economic Analysis; 2022, 1(1):2. https://doi.org/10.58567/jea01010001
Chicago/Turabian Style
Liu, Huiling; Lei, Heng; Zhou, Youcheng 2022. "How Does Green Trade Affect the Environment? Evidence from China" Journal of Economic Analysis 1, no.1:2. https://doi.org/10.58567/jea01010001
APA style
Liu, H., Lei, H., & Zhou, Y. (2022). How Does Green Trade Affect the Environment? Evidence from China. Journal of Economic Analysis, 1(1), 2. https://doi.org/10.58567/jea01010001

Article Metrics

Article Access Statistics

References

  1. Acemoglu, D., Johnson, S., and Robinson, J., (2005). The rise of Europe: Atlantic trade, institutional change, and economic growth. American Economic Review, 95(3): 546–579. https://doi.org/10.1257/0002828054201305
  2. Antweiler, W., Copeland, B.R., and Taylor, M.S., (2001). Is free trade good for the environment? American Economic Review, 91(4): 877–908. https://doi.org/10.1257/aer.91.4.877
  3. Balineau, G. and De Melo, J., (2013). Removing barriers to trade on environmental goods: An appraisal. World Trade Review, 12(4): 693–718. https://doi.org/10.1017/S1474745613000074
  4. Berlin, K. and Lang, J.M., (1993). Trade and the environment. Washington Quarterly, 16(4): 35–51. https://doi.org/10.1007/978-0-230-30531-1_15
  5. Brunnermeier, S.B. and Levinson, A., (2004). Examining the evidence on environmental regulations and industry location. Journal of Environment and Development, 13(1): 6–41. https://doi.org/10.1177/1070496503256500
  6. Cao, B. and Wang, S., (2017). Opening up, international trade, and green technology progress. Journal of Cleaner Production, 142: 1002–1012. https://doi.org/10.1016/j.jclepro.2016.08.145
  7. Charnovitz, S., (2010). Trade and Climate Change: A Report by the United Nations Environment Programme and the World Trade Organization by UNEP and the WTOGeneva: WTO, 2009. World Trade Review. UNEP/Earthprint. https://doi.org/10.1017/S1474745609990206
  8. Cherniwchan, J., (2017). Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing. Journal of International Economics, 105: 130–149. https://doi.org/10.1016/j.jinteco.2017.01.005
  9. Chung, Y.H., Färe, R., and Grosskopf, S., (1997). Productivity and undesirable outputs: A directional distance function approach. Journal of Environmental Management, 51(3): 229–240. https://doi.org/10.1006/jema.1997.0146
  10. Cohen, W.M. and Levinthal, D.A., (1989). Innovation and Learning: The Two Faces of R & D. The Economic Journal, 99(397): 569. https://doi.org/10.2307/2233763
  11. Cole, M.A. and Neumayer, E., (2003). The pitfalls of convergence analysis: Is the income gap really widening? Applied Economics Letters, 10(6): 355–357. https://doi.org/10.1080/1350485032000072361
  12. Copeland, B.R. and Taylor, M.S., (1995). Trade and transboundary pollution. In: American Economic Review. CRC Press, 716–737. http://www.jstor.org/stable/2118228
  13. Copeland, B.R. and Taylor, M.S., (2004). Trade, growth, and the environment. Journal of Economic Literature, 42(1): 7–71. https://doi.org/10.1257/002205104773558047
  14. Cui, J., Lapan, H., and Moschini, G., (2012). Are Exporters More Environmentally Friendly than Non-Exporters? Theory and Evidence. Iowa State University, (Working Paper No. 12022). http://www2.econ.iastate.edu/papers/p15549-2012-10-12.pdf
  15. Dai, M., Maitra, M., and Yu, M., (2016). Unexceptional exporter performance in China? The role of processing trade. Journal of Development Economics. https://doi.org/10.1016/j.jdeveco.2016.03.007
  16. Damania, R., Fredriksson, P.G., and List, J.A., (2003). Trade liberalization, corruption, and environmental policy formation: Theory and evidence. Journal of Environmental Economics and Management, 46(3): 490–512. https://doi.org/10.1016/S0095-0696(03)00025-1
  17. De Alwis, J.M.D.D.J., (2015). Environmental Consequence of Trade Openness for Environmental Goods. Sri Lankan Journal of Agricultural Economics, 16(1): 79. https://.doi.org/10.22004/ag.econ.233667
  18. Dean, J.M., (2005). Does Trade Liberalization Harm the Environment? A New Test. SSRN Electronic Journal, 35(4): 819–842. https://doi.org/10.1111/0008-4085.00155
  19. Ederington, J., Levinson, A., and Minier, J., (2004). Trade liberalization and pollution havens. Advances in Economic Analysis and Policy, 4(2). https://doi.org/10.2202/1538-0637.1330
  20. Elliott, R.J.R. and Zhou, Y., (2013). Environmental Regulation Induced Foreign Direct Investment. Environmental and Resource Economics, 55(1): 141–158. https://doi.org/10.1007/s10640-012-9620-0
  21. Ernst, D. and Kim, L., (2002). Global production networks, knowledge diffusion, and local capability formation. Research Policy, 31(8–9): 1417–1429. https://doi.org/10.1016/S0048-7333(02)00072-0
  22. Esty, D.C. and Dua, A., (1997). Sustaining the Asia Pacific Miracle: Environmental Protection and Economic Integration. Peterson Institute Press: All Books.
  23. Esty, D. and Gentry, B., (1997). Foreign investment, globalisation and environment. Globalization and the Environment.
  24. Frankel, J.A. and Rose, A.K., (2005). Is trade good or bad for the environment? sorting out the causality. Review of Economics and Statistics, 87(1): 85–91. https://doi.org/10.1162/0034653053327577
  25. Grossman, G.M., (2010). Pollution and growth: what do we know? The Economics of Sustainable Development, 19: 19–46. https://doi.org/10.1017/CBO9780511751905.003
  26. Grossman, G.M. and Krueger, A.B., (1991). Environmental Impacts of a North American Free Trade Agreement. National Bureau of Economic Research. NBER working paper series. https://doi.org/10.3386/w3914
  27. Harrison, A., (1996). Openness and growth: A time-series, cross-country analysis for developing countries. Journal of Development Economics, 48(2): 419–447. https://doi.org/10.1016/0304-3878(95)00042-9
  28. HEI, (2018). A special report on global exposure to air pollution and its disease burden. Health Effects Institute., 24.
  29. Hufbauer, G.C., Charnovitz, S., and Kim, J., (2009). Global warming and the world trading system. Peterson institute for international economics.
  30. Jun, Z., Guiying, W., and Jipeng, Z., (2004). Estimation of China’s Interprovincial Material Capital Stock: 1952—2000. Economic Research, 10: 35–44.
  31. Levinson, A. and Taylor, M.S., (2008). Unmasking the pollution haven effect. International Economic Review, 49(1): 223–254. https://doi.org/10.1111/j.1468-2354.2008.00478.x
  32. Lileeva, A. and Trefler, D., (2010). Improved access to foreign markets raises plant-level productivity for some plants. Quarterly Journal of Economics, 125(3): 1051–1099. https://doi.org/10.1162/qjec.2010.125.3.1051
  33. Lin, J., Pan, D., Davis, S.J., et al., (2014). China’s international trade and air pollution in the United States. Proceedings of the National Academy of Sciences of the United States of America, 111(5): 1736–1741. https://doi.org/10.1073/pnas.1312860111
  34. Meng, F. and Zhao, Y., (2022). How does digital economy affect green total factor productivity at the industry level in China: from a perspective of global value chain. Environmental Science and Pollution Research, 1–19. https://doi.org/10.1007/s11356-022-21434-0
  35. Mileva, E., (2007). Using Arellano-Bond dynamic panel GMM estimators in Stata. Working Paper, Economic Department, Fordhan University, 0(1): 1–10.
  36. Millimet, D.L. and Roy, J., (2016). Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous. Journal of Applied Econometrics. https://doi.org/10.1002/jae.2451
  37. Morsink, K., Hofman, P.S., and Lovett, J.C., (2011). Multi-stakeholder partnerships for transfer of environmentally sound technologies. Energy Policy, 39(1): 1–5. https://doi.org/10.1016/j.enpol.2010.09.043
  38. Oh, D. hyun and Lee, J. Dong, (2010). A metafrontier approach for measuring Malmquist productivity index. Empirical Economics, 38(1): 47–64. https://doi.org/10.1007/s00181-009-0255-0
  39. PWC, (2017). Is Paris possible? The low carbon economy index.
  40. Qin, B.T., (2014). Research on China’s Regional Energy Efficiency—The perspective of prefecture-level cities. World Economic Paper, 1: 95–104.
  41. Song, M. and Wang, S., (2018). Market competition, green technology progress and comparative advantages in China. Management Decision, 56(1): 188–203. https://doi.org/10.1108/MD-04-2017-0375
  42. Steenblik, R. and International Institute for Sustainable Development. Global Subsidies Initiative., (2007). Biofuels--at what cost?  government support for ethanol and biodiesel in selected OECD countries: a synthesis of reports addressing subsidies for biofuels in Australia, Canada, the European Union, Switzerland and the United States. The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD), 72.
  43. Stern, D.I. and Jotzo, F., (2010). How ambitious are China and India’s emissions intensity targets? Energy Policy, 38(11): 6776–6783. https://doi.org/10.1016/j.enpol.2010.06.049
  44. Walz, R., Pfaff, M., Marscheider-Weidemann, F. (2017). Innovations for reaching the green sustainable development goals –where will they come from? International Economics and Economic Policy, 14(3): 449–480. https://doi.org/10.1007/s10368-017-0386-2
  45. Wooders, P., (2009). Greenhouse Gas Emissions. The Impact of Liberalizing Trade in Environmental Goods. Iisd. Citeseer.
  46. Xu, J. and Duan, W., (2012). Reestimating the capital stock of China. Proceeding of 2012 International Conference on Information Management, Innovation Management and Industrial Engineering, ICIII 2012, 2(1): 175–179.
  47. Yu, V.P., (2007). WTO Negotiating Strategy on Environmental Goods and Services for Asian Developing Countries. Environmental Goods and Services Series, Policy Discussion Paper.
  48. Zhao, X., Yang, H., Yang, Z. (2010). Applying the input-output method to account for water footprint and virtual water trade in the Haihe River basin in China. Environmental Science and Technology, 44(23): 9150–9156. https://doi.org/10.1021/es100886r
  49. Zugravu-Soilita, N., (2018). The impact of trade in environmental goods on pollution: what are we learning from the transition economies’ experience? Environmental Economics and Policy Studies, 20(4): 785–827. https://doi.org/10.1007/s10018-018-0215-z
  50. Zugravu-Soilita, N., (2017). How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects. Environmental and Resource Economics, 66(2): 293–338. https://doi.org/10.1007/s10640-015-9950-9