Is environmental efficiency trade inducing or trade hindering?

Seda Meyveci Doganay, Selin Sayek and Fatma Taskin

Energy Economics, 2014, vol. 44, issue C, 340-349

Abstract: Global efforts to identify strategies for sustainable economic growth and development underline the need for understanding important links between environmental policies and international trade. In this paper, by constructing an environmental efficiency index for 111 countries from 1980 to 2009, we are able to empirically test for one such link. An improvement in the environmental efficiency index in terms of carbon dioxide emissions reflects a decrease in the cost of efforts to mitigate the environmental costs associated with growth. Countries that improve their environmental efficiency are found to experience strong international trade effects, both through increased exports and increased imports. While the positive link between efficiency improvements and exports is supportive of the Porter hypothesis, the positive link between efficiency improvements and imports is supportive of strong positive income effects on account of environmental efforts. These results, which are robust to alternative estimation strategies, lend strong support to global efforts to improve countries' environmental efficiencies.

Keywords: Environmental efficiency index; Porter hypothesis; Gravity model (search for similar items in EconPapers)
JEL-codes: F14 F18 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:44:y:2014:i:c:p:340-349

DOI: 10.1016/j.eneco.2014.04.004

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