Impacts of Environmental Agreements on Bilateral Trade of Climate Industry

Sung Jin Kang, Sun Lee and Seon Ju Lee
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Sung Jin Kang: Department of Economics, Korea University, Seoul 02841, Korea
Sun Lee: Department of Economics, Korea University, Seoul 02841, Korea
Seon Ju Lee: Department of Economics, Korea University, Seoul 02841, Korea

Energies, 2021, vol. 14, issue 21, 1-17

Abstract: We investigated the effect of agreements related to climate change on bilateral trade, using the Poisson pseudo-maximum likelihood (PPML) estimator on a large dataset that requires computing high-dimensional fixed effects. This study develops the concordance between commodities based on harmonized systems (HS) and technologies defined by both international and cooperative patent classifications (IPC/CPC). Using the OECD ENV-TECH classification, covering 169 exporting countries and 179 importing countries worldwide from 1991 to 2019, we determined the relationship between HS commodities and IPC/CPC climate change technologies. The main findings show that, first, the Kyoto Protocol has increased international bilateral trade in the climate change industry, while the Montreal Protocol has led to the opposite effect. In addition, the impact of environmental stringency on international bilateral trade in climate-related industries was negative and significant, refuting the Porter Hypothesis. This result was consistent within the trade between the convention countries. Therefore, national and industrial perspectives are relative, and voluntary climate mitigation methods should be applied, considering the areas where carbon reduction is relatively difficult. In other words, the conventions and policies must shift to a global paradigm in environmental protection and a more inclusive approach, with recognition of diversity in governance types.

Keywords: climate change; technology; environmental agreements; gravity model; Poisson pseudo-maximum likelihood (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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